I agree with you, but the specific language used could have been better. "Essentially holding the site hostage" implies that the ex-employee had a responsibility to do some work, which he did not.
Oh, I guess we disagree on that part then. To me it's pretty clear that they mean there's no way for their beloved baby (the site) to be returned because the person holding the power to return it is unwilling to do so. A bit like a school with kids locked inside and the janitor won't open the doors because the school didn't pay him.
Hah. Analogies.
(Yeah, I stretched it there.)