Uploading music (or any other protected work) to which the up-loader does not have the rights, is making a copy. Unless the recording was released under a permissive license, or its copyright has expired (not likely here) this is copyright infringement.
A game developer using such recordings in a game without permission from the copyright holder is also infringement.
Either the holder of the copyright on the recording, or of the copyright on the musical composition (these may well be different people or entities), or both holders, could sue he uploader, the developer, or both, and collect damages. That a fee in "game currency" was paid to the uploader may make the damages somewhat larger, but otherwise will not matter.
No TOS provision could protect either the uploader or the developer in question, unless the copyright owner had agreed to it. That all this is in the context of a game does not excuse the infringement at all.
However, the person who uploaded the recording would probably not be liable for the developer's use of it in a game, only for the infringement by uploading.
The copyright holder (either one) may decide to sue, or not. If the holder thinks the probable damage award is too small to justify the time, trouble, and expense of bringing suit, s/he may choose not to sue. Or of course if the holder never learns of the infringement, there will be no suit.
The person or firm that runs the site might also be liable for damages if the site encouraged or solicited such infringements, or built its business on them.
