How does this weigh on you? I would feel like doing something wrong, like trying to cheat the house in a casino. So the exchange says that they do not allow people trading from your geographic location, so you open up a VPN and sneak in there that way, undetected.
It's not like cheating at all. It's more of a "scratch my back and I'll scratch yours" situation. Exchanges badly need the liquidity but fear US regulators. Allowing VPN usage is a happy medium that addresses both concerns.
What ways do the exchanges have to identify people on VPN's? If an exchange catches you on a VPN (or later when moving funds out of their exchange and they identify your location) what repercussions are fair? Is freezing all your funds too harsh of a penalty?
Of course it's too harsh. A terms violation (with no financial loss to the exchange) doesn't justify confiscating funds!