I would think it is illegal, there is I believe a set sq foot per person, limitation to stop overcrowding, the police raided a place not long back and found over 50 in one place, the owner was arrested. If one is not able to change, because of a lack of room, I would say, they are illegal. Unless it's in a designated foreign workers area.
I doubt if you will see your money again, although you can try to pressure, them, but be careful, you know what your own countrymen can be like...Just say return the money, and their will be no problem, if you leave without it, you will lodge a police rapport, make sure you have some witnesses around, for your own peace of mind.
Don't get into a fight here in Singapore, its not worth the hassle, you will be arrested and jailed, I would try the local community service and ask what you should do, or another help organisation, or welfare service. There will be one some where, ask around!