that is very commendable of you to chime in over here & to offer this very fair resolution...you deserve:
If the bet was cancelled well before the game & an email was sent, then, IMO, ibfm doesnt have a leg to stand on...(although I can certainly understand that it still may be troubling for ibfm as he may have turned off his PC, thinking that he had a bet & not found out till after the game).
Offering the 500$ (assuming the bet had been cancelled well before game time) is extremely fair IMO. I also think it is a commendable offer & applaud you for addressing it in this open forum...
I apologize for my harsh words above...i took ibfm at his word that it was cancelled after game time which i feel is inappropriate...
may I highly recommend that you 'repair' your software not allowing 'overlimit' bets....