That's an archaic understanding or the word. According to The Chambers Dictionary of Etymology its use to indicate a psychological injury was first recorded as far back as 1894.Trauma used to mean something very specific, like physical injuries after a car accident.
An arrest cannot be wrongful, but done in good faith. It's the lack of good faith that makes it wrongful.I'm more inclined to believe someone who claims they were psychologically "traumatised" by something if they aren't putting in a big claim. Like I said, when all this fuss dies down, he is made for life. Can settle down with his fiancé, buy a house mortgage-free. He has been exceedingly and excessively generously compensated for something that I believe has no lasting effects. Of course, he'll say "nothing would ever compensate for what happened etc" but it's my opinion that is BS. He could have co-operated with the arrest. In most countries, even if an arrest is mistaken, you probably don't get compensated at all, if it's wrongful, but done in good faith.