I feel like this could be abused by a bad actor by recreating instances in several ways:
Use the “dead” accounts that are still mods on communities on other instances.
Sneakily monitor user behavior (like votes etc.) without looking out of place.
Impersonate users.
I feel like it would be a good idea to start a list of the domains of dead instances and add them to a blocklist until the original people start using them again.