I wouldn't allow the trading of draft picks, period. I really dislike the idea of trading one year of production for an uneven chance next year. Sure, keepers do that already to some extent, but not as much and everyone has the same amount of keepers. Whereas it can become really imbalanced trading draft picks since you've gotten value for all of this year's players, making them all "keepers" in a sense. Lastly, at least for keepers you're still taking a risk or making a bet that the players you project will do well next year will. With draft picks, you don't carry that risk; you draft based off of new information next spring.
I see nothing redeeming in what he is doing. He is not, "thinking longer term" than anyone, as someone here tried to say. He's just given up on this year after one measly month. That's pathetic.
As to how to address it, come to a league consensus with at least a 2/3 majority required to pass the rule you discussed in the off-season. As someone else said early on in this thread, it's not like anyone drafted with an eye to trade them all May 1 so normal concerns about in-season rule changes are less acute. Oh, and ask the fire sale guy who much good all those draft picks will do him if he gets replaced by a real owner next year.
Lastly, if you do allow trading of draft picks, make sure you get next year's league fees from everyone who trades them away.
0-3 to 4-3. Worst choke in the history of baseball. Enough said.