The recipe wasn't bugged, they simply didn't account for the impact it would have and blamed the players.
And, apparently they banned people depending on how many times you salvaged the jewelry. 100+ salvages meant getting a permanent ban.
The issue is, it wasn't an exploit. The money gained wasn't like 5g average every attempt or something massive like that, and the money gained was directly reliant on the market of course.
It was, kinda. How much money you got from it wasn't relevant, it was how much Ectoplasm you could generate which was the problem.
Using the Mithril jewelry
you could get stacks of ectoplasms, and it was bloody cheap since Ectoplasm prices went to hell.
it was obvious it shouldn't have worked like it did