Well. I would be livid too but I have all purchases password protected on the tablet, so if DS1 (7) managed to get through those then I'd probably be in awe at his brilliance, as well as murderously angry.
Would I sell his stuff - not his precious collection, no. In his case, his HTTYD dragons - no. But I'd take other stuff and sell it, and he'd be barred from getting the occasional treat he does now, and he'd be reminded every single fucking time he asked for something why he wasn't getting it, to drive the point home.
Would I cancel his birthday - no. But I'd reduce it.
If he got pocket money then that would be cancelled as well until the rest of the debt was paid off; but he doesn't so can't do that.
He'd also have zero unsupervised screen time - he gets very little as it is now - and I'd probably delete games from the tablet that have the option to spend real money (most of them, to be fair).
However, he has been warned many times already not to even think about spending real money on the games (he can't anyway) so I'd not only be livid but massively disappointed in him for disobeying me.
I can see the "gotta be harsh to drive the point home" attitudes, and understand them - but I'm also a person who gets attached to things, and if someone had taken my most precious stuff and sold it, it would NOT have achieved what it wanted, it would have turned me bitter and made me think "fuck the lot of you then" - counterproductive.
Luckily my parents didn't do that, as both of them had parents who gave away/sold their most precious possessions at a young age, not even as a punishment :(