Never dealt with Purple Wave before, but Ritchie Bros does something similar with credit cards to be able to bid online at their auctions. They put a reversible charge on your card of 25% of your maximum approved bid amount, at least that is how it worked the last time I bid online on one of their industrial auctions a couple of years back.

The credit card thing is one thing however.  Keeping the bid high after one bidder (you) was disqualified smells like fraud to me. Any chance there may have been a third bidder involved around the same time you bid?