@BeAware Naive me never even considered that the "limit" option could be used by an instance Admin to shadow-ban a user privately.
I find the feature useful and I have used it, perhaps 3 times, to limit a suspected spammer/scammer account until I could have a dialog with the account creator. But, in all cases, I notified them that I limited their account and explained the impact. I'd never limit (silence) an account secretly.
I think it is unethical for an instance owner to do so without notification to the account owner.
I don't know if it's truly happening on .social. I bet though there's a particular woman who does it often on her instance to her local accounts, but I won't mention her name. You know who I mean.
You always raise interesting questions.