But that's an awful analogy and frankly you should be ashamed for even trying to paint it in that light. NOIP did nothing illegal whatsoever, their only "crime" was that they didn't do enough about malware distribution to keep Microsoft happy- which last I heard wasn't illegal.
To use your car wash analogy, it's more like the car wash unknowingly washed the car of a drug trafficker and then was essentially put out of business the next day for being "complicit in the illegal activity".
I am uneasy about this situation, but the car wash in question is more like the car painting shop in Grand Theft Auto. Even if painting cars is a legitimate activity, when 75% of your customers are trying to mask illegal activity you should be doing some due diligence to ensure that you're not enabling illegal activity.
I'm not totally okay with what happened here, but I'm confident that it was not a "oops, sorry, we'll ban that botnet" situation. no-ip's primary use case is botnets, and they do have a responsibility to minimize botnet use. They can't claim ignorance given the widespread use.
no-ip primary use case is certainly not botnets. It's used by dsl users to connect to their home network, or to get an easy to remember address for a vps, or maybe while developing something before getting a proper domain.
75% is a HUGE overstatement, No-IP allegedly has ~4 million active accounts. Of those 4 million, 3rd party security firms claimed ~12k of them were involved in the distribution of these two bits of malware, No-IP said the number was more like 2k. If those numbers are correct then you're talking thousandths of a percentile being the reason for this domain seizure.
If you use a car wash that is also laundering money, your legitimate need for a clean car is not a defense against shutting the business down.