How can I get away with Xbox Live Marketplace fraud? (please read)?

Here's what happened. I bought a game off of the XBL marketplace and it was TERRIBLE. I spent an hour trying to get a refund and they finally gave it to me. I bought another game with the refunded points. However, according to the Microsoft support person helping me, my license for the refunded game is taken away, so I'm not allowed to play it anymore. I didn't really care atm because the game was bad and I got a better game. However, they said the game would still be on my console but they told me to just delete it and not play it again.
However, my brother liked the game and wants to play it again. I was told that playing the game would have consequences (XBL marketplace fraud) and I understand I could get PERMANENTLY banned if caught for playing the game (this has happened to people before), so my question is, can they keep track of what games I play if I'm offline?