It is not weird to hear such episode in the more authoritarian Europe campus. If you don't want one more master degree, then ask for compensation$. Life is unpredictable, so can only make plan for the future and move on. If you apply for PHD again (for sure not in UK), you will have the fear of not able to complete. Do you want to take such risk? Do you know how to handle such fear ? What is your backup plan if the same thing happen?
If you go to job market, a Cambridge branded master degree applicant is offered more opportunities than PHD , as less openings for such a high degree holder as PHD.
The most important thing so far is to make yourself happy and relaxable, then you will figure out that you can still live a good life despite of such shits.Do not make your life a tragedy because of nasty people.
Wish you a Merry Christmas!