It's not that, just you can't do things in character, ESPECIALLY against other player characters and not expect consequences.
I told this to Hound as well, but while this particular attempt to profit off the party for personal gain was pathetically minor, it was also painfully transparent. The characters may not know exactly what Squee did, but we're all pretty aware he did SOMETHING.
This now means noone is inclined to trust him, which strains beleif why they would bother to deal with Squee any longer than absolutely necessary, because he's shown he will plot against the party if it suits him. Why would the party keep someone like that around?
It is an issuse that needs to be addressed before it becomes a problem and something happens in character that wil affect the game as a whole, ie, the goblin stepping over the line and finding himself cut down. I'm inclined to think such a thing would ruin the game for at least one person. Best not to let it go anywhere near that point, don't you agree?