One of my demo licensed server (Hosted by LFS) switched to S3 licensed and kicked all users. I think a bug happened.

Just go in host options and set it back to demo and restart it.

Just a restart solves it but just wondering why it happened.

ddos attack and related problems..

It seems strange that it changed to S3 suddenly.

If it was started as a Demo server this shouldn't be possible. But if it was a licensed server, started with demo restrictions (Blackwood, XFG/XRG/FBM so demo racers can join) this could be possible. In that case, for example, if an admin enabled mods then suddenly the server would require an S3 license to remain connected.