Years ago I read about some game service that detected cheating and put cheaters into games with other cheaters. The author said it was pretty effective.
Reminds me of Game Dev Tycoon's clever anti-piracy trick, where they released a "cracked" version of the game on file sharing sites shortly after launch. The "crack" disabled the copy protection but also changed the gameplay so that NPCs would pirate your products in-game and drive you out of (virtual) business.