It could just have something to do with the fact that many people think ads are not only annoying but also highly manipulative, creating artificial needs in people, a tool to make already successful and rich companies even richer, … and the surrounding technology to power them is unethical, hoarding tons of information, building profiles of people, tracking which websites they visit, what search terms they use, …
When people talk about blocking ads, being frustrated about them showing up, it’s just kind of disrespectful to be like “well you could just pay for the service, you know?”. Besides, who knows how much actually ends up in the creators’ pockets.
A personal instance generally doesn’t have a big reach, unless people actively follow the person who’s posting the doxxing information.* The fediverse may not be a good way to spread personal information of others, throwing up an instance like that is not much different than throwing up a website or forum.
There’s two things I can think of you can do: Contact the company that hosts the website to take it down – I’m unsure about how you go about this, but I’m sure you can find out more about that. And to report the instance to other instance admins to get it blacklisted, perhaps get it on a block list, limiting its reach and thus effectiveness. Get in contact with big instance admins, they likely have chatrooms you could join, and they might be able to help with the other step as well.
*edit: In the case of Lemmy, I suppose it would be people following a community, rather than a user directly. If moderators or admins act on the posted informated and delete it, the deletion will federate as well and any legitimate instance will automatically delete the content on their servers as well. This would also be true for Mastodon and such. If not, the above applies.