I wish there was more of backstory as to why he lost his rank. Seems like some context and substance is missing.

I am always torn about this. I have seen dudes join our academy with excellent skills to sub-par skills that do not match their current rank. I personally believe if you have a sub-par student then just keep them at that rank longer while he is with you, especially, if he received his current rank from a legitimate school. I do not see the reason to demote someone.

Of course, this sort of happened to me. I received my blue belt while at 10th planet. I competed in gi tournaments and trained in the gi from time to time when I was at hq and our satellite school. However, when I moved and joined Checkmat, I was told I had to go back to white belt and so I did.