Whilst I understand that people have taken offense to certain racially or ethnically based insults, and understand that people try to avoid filters by using other words, an no tolerance policing policy isn't the way to prevent things. People will always find ways to be vulgar and racist but policing in this way just harms innocent people more. A ban to the offensive word is understandable. This word is used as a racially charged insult which there should be no tolerance for. Additionally, people trying to avoid the ban by using other spellings to insult people in the same way should receive the same punishment. But banning the use of a country is not only heavy-handed but also quite derogatory to the people of the country. Reducing the name of the country to the insult which shares it's part may cause serious offense to someone of that nation. To say that the words are equivalent is only helping to perpetuate the derogatory views others have of people from that area.
Theoretical assumptions aside, the only people that are hurt by zero tolerance policies are the innocent people who help fund your server. I, like many others, have bought VIP passes to your server and the lack of support available in the face of an unjust sentencing makes me question that decision. The people who are aware of the ban on the word will not only avoid its use and find another way to be derogatory and insult people, but will use this well-hidden fact to hurt the other innocent players of the server. The zero tolerance policy only serves to add even more fire to the already vast arsenal of the delinquents.
What I personally don't understand is why a warning isn't given. Just a quick "Hey, this word has been used to insult people, please don't use it or you will be muted!" would suffice. I understand there are likely difficulties with the mod regarding this but this chat went on for a while before I, like many others, fell into the carefully woven trap. There was ample time for the likely many chat moderators to step in and say "This word is banned on this server, if you use it you will be muted, you have been warned." I also understand there can't be a "list of banned words" as not only will that help the current predicament but a list of vulgar words being publicly displayed would not look good for your company. But policing a word which, to the vast majority of people, has no derogatory meaning whatsoever, with absolutely no recourse for appealing the heavy-handed punishment just seems contradictory to your aims of a fair and just server.
I'm not saying there's an easy solution but for there to be no support available for the victims in this situation almost seems tyrannical. And I'm aware that a 12 hour mute isn't the end of the world but the message being portrayed is that support isn't available for those who need it and that lack of trust which, for myself and I assume for many others, that is created from this lack of support would mean many would be less likely to support you in the future. I just think its something worth thinking about and implore you to reconsider this harsh, zero tolerance punishment.