I have spent an unhealthy amount of time on reddit over the past 14 years and have never heard of such a thing. I find it unlikely that it's a significant problem which I've just been lucky to never brush against.
It exists, but it only really happens on either subs with zealot moderators who are trying to maintain ideological purity, or on normal subs who are just trying to get rid of particularly obnoxious users who are more often than not part of the first category.
You're lucky. Naturally this isn't something that the moderators in question particularly like to talk about as it instantly gives them away as nutjobs. The thing with malicious moderation is that if it is done well, lurkers never realize. That in turn contributes to a warped view of reality. That said, reddit is still better than other social networks because, with some very big caveats, moderation is somewhat isolated from one subreddit to the next.
I just can’t believe you’ve never heard of this. It’s extremely common and is prevalent in some of the largest subreddit. Or was when I left Reddit for good last year