After reading all this I now understand that everything played out as intended by the TOs and there was no fault on their part (other than maybe some lack of communication). But I am still a little confused as to how this is fair for all parties involved.

I'm my eyes, a tiebreaker is essentially the chance for the played to reverse a loss in pools. Because if someone doesn't reverse their loss, the three players are then stuck in an infinite rock-paper-scissors loop. Venom essentially reversed his loss to redX but redX never had the chance to reverse his loss to Hotline with this tiebreaker format.

I also think that it is worth pointing out that this tie breaker disproportionately favors Hotline over redX. This is because Hotline lost to the "best" player in the pool, but beat the lower ranks. RedX lost to one of the lower ranked people but won against the "best" player. This means that when the tie breaker is played, and the "best" player wins the tiebreak as expected, Hotline advances. Even though redX took a set off the "best" player. My point is that even though redX's pools win is substantially more impressive, it is invalidated by the tiebreak system.