Moderate it.

Have actual (paid) humans review the content that users upload.

And please don’t fall for “algorithms are good enough”.

Google did that with YouTube Kids, and look what horror that spawned.

Do you think they "fell for" that line or peddled it. The later seems most likely to me.

Probably both.

Agreed probably both.

When banning spammer accounts, do you think it's better to return an error (i.e. 404) or shadow ban them so it looks like the call succeeded?

Shaddow banning is mostly good for individual people who are annoying other customers. They likely don't understand what shadow banning means and don't check for it.

Commercial spammers understand shadow banning and check for it.

The best option for commercial spammers is to make it expensive to post on your platform. That means shutting them down right away, so the effort to sign up doesn't get the reward of having an account available for days.