And by profiting off illegal activity, it brings extra scrutiny on the whole scene, including the creators that don't take any money. Like when Shirakami went to prison for making Genshin porn, it scared many of the chinese producers into wiping their presence online. It's a fine line to tread. Japanese artists are probably safe though, assuming it's seen as doujin work.It's not even just the use of free assets - he's exclusively profiting off hololive IP in a way that in many countries would get you sued and is directly violating several of their fan content guidelines. He's got no high ground to stand on. I know where I'm at, I'm not gonna pretend I have a big problem with it, but you can only really get away with it under certain conditions and he isn't following those.
I don't have a drop of sympathy for people who get super defensive over protecting "their" work when the whole thing is using other people's licensed stuff without permission or in this case explicitly against their rules to begin with.