Seems like a factual question subject to dispute. Additionally, all prior charges were only authorized with the expectation that the cardholder would receive the reimbursement to make the applicable credit card payments. Seems worth a shot at least before resorting to bankruptcy protection.
[For informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem.]
I am no lawyer, however bankruptcy (maybe even chargeback) might open a whole new can of legal worms, 1) fraudulently claiming income in order to be approved for a credit card. 2) tax evasion for not declaring income for points sold (if that’s what they did) etc.
As mentioned, all impacted should get competent legal help before they make their next move.
As an aside, heard from a relative who has several friends that were impacted by this event that the victims are coordinating/in touch with the lawyer for the perpetrator, as mentioned I am no lawyer but that does not seem like a good idea, with the lawyer being obviously conflicted.