Crimson Echoes/WMG

Square-Enix doesn't care that much about Crimson Echoes anymore.

Probably hoping for more attention, the CE team chose a very bad timing to announce the imminent release of their hack, since it came when the DS version of Chrono Trigger had been recently released. SE's reaction, while arguably heavy-handed, wasn't without motivation - coverage and diffusion of CE may have caused more people to know more about emulation and that there was also a version of CT you could get for free.

As of early 2011, however, the critical sales window has long expired and, aside from the impossibility of stopping the circulation of the leaked CE, it might be even some publicity for CTDS. Moreover, Squenix's current situation (see the disastrous launch of Final Fantasy XIV, or the little that has come from the acquisition of Eidos so far) means that they have bigger problems at hand than striking a second time against a fangame of a franchise that's currently unlikely to receive a future installment, further alienating the fanbase in such a delicate period for the company.

Of course, in case the C&D letter was fake [there are good motivations for both theories, so I don't take sides], it would have been all a Xanatos Gambit to try people into making this reasoning :P