I have been looking over this and there was bug filed, JIVE-64881
JIVE-64881Create account page doesn't validate uncommon domains
This has been resolved by Engineering and will be pushed out to the 2016.2 cloud release and v8.0.4 of Hosted Environments.
Hope this helps.
TH problem still exists. We cannot create new accounts using the REST API when the email address has a custom domain.