Such a weird story. I don't get the "consent" bit. Did he ask "I would like to cane you / your child, for being disrespectful, that's the only way, so either accept it or get out of my club" ! Really? How?
And the child / parents said "we do understand, yes fine, he deserves the punishment" ? ? ?
This is so weird. How does it happen? Sounds so twisted and sickening and also so far fetched, so unreal. I cannot imagine a conversation like this ever taking place and any parent ever agreeing their child being "punished" in that manner. Instructor being from the Far East or not is totally irrelevant, I couldn't imagine this conversation happening in a club in Canada I would think! In Far East, maybe. Canada, not so.
If it's true, it's sick from every angle. Take your child from that place.
Also it might be a lie, spread by a rival or enemy of the instructor, hence no further action being taken by the authorities, but if that's the case, still there is a bad smell, too many disturbing details. I would take my child from there.
Whatever the details are, there must be some sort of wrongdoing, otherwise the instructor would not have been suspended from teaching. I understand he doesn't teach anymore so, why is that? No smoke without fire. Even if he was later on acquitted or whatever, there seems to be enough wrongdoings to warrant him to be taken away from teaching. So it's bad enough.
The very first thing i would do now, is to find out what other parents know about it, ie whether they can verify if any of these allegations really occurred. If it appeared in the local papers, surely the other parents must have witnessed something / got involved with it. At the same time you should also ask your child's instructors about it and see what they say and how they say it. You have every right to ask about it. They should understand your concerns and should be able to reassure you. No need to be polite about it.
If the corporal punishment really happened, then yes definitely take your child from there, no doubt about it. If other parents and instructors haven't witnessed it and don't know anything about it so in other words, the whole saga was a lie spread by a rival, then you can have a clear conscience and a happy heart to keep him in that club. Having said that, change is good so i would probably change clubs anyway.
Changing clubs is good because your child will experience a different club, different instructors, different teaching styles, a different culture, so it'll enrich him and give him adaptability which is good. You don't have to stay loyal to the same club forever, change is really good. If you don't like the new club, you can always go back to the old one later on, provided that the allegations were unfounded in the first place.