The software doesn't work on the live game - it's designed for a "private server" / fan reconstruction based around the 2004 version of the game.

Jagex almost certainly knows of lost city, but it's not really comparable to OSRS these days. People are likely to play 2004scape and then move to the live version of the game once the nostalgia wears off.

Jagex's lawyers have been absolutely decimating botting communities in the last 6 months, if they wanted Lost City gone, it would be gone already.

I wouldn't surprised to see them reach out for the valuable data he's collecting on the SDK's main server.