What I learned from this is not to ignore the warning signs of a psychopath client. Because you can easily get sucked in to a bad situation regardless of your good intentions, and you can't rely on the marketplace to resolve these disputes in your favor. This scenario can also play out on other freelancing sites, and it can also happen if you solicit clients directly and they turn out to be well-connected.
I have to disagree. This is not how the business world works. If a client is being an ass, you have the right to fire them. Upwork doesn't afford you this opportunity unless you want to see your JSS drop by dozens of points.