I don't know if the cube itself was an issue as much as advertising it as a minecraft item. (Tags are used to draw searchers into your shop, so if you tag with something that is trademarked or copyrighted, you're infringing on that intellectual property for your own gain).
Etsy says that they cannot unilaterally take down some items that might be infringing because if they did so, they'd be responsible for monitoring the entire site the whole time for infringement, and any that was found would make them liable. So instead they are a safe harbour, or something like that, where they basically say, we're like the highway or like google - we don't involve ourselves, it's up to the people who hold the intellectual property to contact us and tell us when they want something removed.
There are many businesses making $ off of other people's IP on Etsy (and elsewhere) because it is hard, and not necessarily worth the time/effort/$, for the various IP holders to police every shop here.