Few points here.
It's not just a matter of "would you rebuild or quit." This could be a major account security issue were it to actually happen. You'd need to figure out how it happened and fix it, or it could happen again. It could of course also be a major house security issue. Or a major bug. But either way it's not as simple as the binary choice of "continue or not."
Also some of what you've lost might be of sentimental value, might represent friends or family (the literal kind or the figurative kind). There's no amount of rebuilding that can correct for that.
Also starting with literally nothing isn't the same as "start with a new character, new account, and see what happens." New characters have stuff, always have. To test this I just made a new character on Siege. I logged in and had basic equipment and the game started me not in the middle of nowhere in an empty house, but in an inn in Britain, right by a mask. No gold but that basic equipment is a lot different from starting with literally nothing. Think about what you'd have to do: start killing things by hand so you can get some basic equipment, Skyrim-style? Do-able to be sure, especially if you have Bushido because Bushido's Lightning Strike move will work with your fists.
Do-able. But, unlike Skyrim, this game isn't set up to facilitate this.
I guess you could go to Haven, and see if there's stuff left for noobs there, or similarly go to Luna for the same purpose, or otherwise try to procure things from other players, but I remember the story of a noob who got a lot of advice and equipment and the result was folks right here on Stratics complaining about it vociferously. I could easily imagine something similar happening here with this situation. "I rebuilt with help from my friends and my shard's community." "N0oB u 5uK! d0 1t uR531F k0mM1e!" Don't think this would happen? Perhaps not, but it's more possible than you're thinking.
Finally, and perhaps most importantly, I, for one, don't have a UO empire. Rather I have, though a combination of factors, a certain level of competence and ability to make a certain contribution in the game world. And yes, it would be bad if someone else's trickery, or a bug, or a lack of security would cost me that. And, yes, combined with other factors, it might make me question if isn't more worth it starting over in a different world instead of this same one.
I probably would stay, but it certainly wouldn't be to prove myself to anyone. And, yes, it would permanently damage my relationship to the game and, by extension, the people I know from it. (After all, what if it was one of them? What if it was their account's security, not my own, that was at issue? Nothing I can do to guard against that, really.)
But, if this were to occur and it was someone else doing it, that would be the real point, wouldn't it.