He should not be demoted. The demotion system on ZARP is very defensive towards its staff members. Firstly they'll get an official warning, and then if they continue to do things that are out of line they'll get another official or be demoted.
Seargent is yet to receive an official, so he'll not be demoted at least.
I agree that some of the reports of you he handled rather rashly, but that is by no means demote worthy. He should be spoken to about how he should treat these situations better, to ensure a fair and safe enviroment for everyone on the server.
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