Does it mean that our passwords are stored in plaintext?
However, it's a sufficient proof for many people.
Although it's reasonable that people provide or share some facilities to their referrals (i.e., VPS, dedicated server, websites, ... so they have the same login IP), to use similar passwords isn't common.
If all people who were banned by UploadStation have this characteristic (similarity in password), I can trust they're cheaters.
Nevertheless, if they only shared the same IP, I don't think they are cheaters.
To catch multi-login users has been a typical issue since 198x, the administrators of MUDs/online-games also did a lot of inventions.
As far as I know, there are not any good solutions without physical communications (phone calls, mobile phone authentications, and so on).
Even though you're not catching multi-login users in a online-game system, the issues are the same.
Be careful, if you make too many faults in this kind of detections and judgements, you will be treat as a big scammer undoubtedly.