Even 1FreeHosting did this on their client's websites (injecting code into site code) and their rank went down.
So yes, it is bad to make too much SEO, if Google knows you are trying to beat the system very far they do take it off.
But, funny enough, search 'cheap kitchens in UK' most of the top ones are the con £595 companies, and they have so many backlinks from kitchen spam, but Google never deranked them or anything, which is weird.
Make sure you do legitimate SEO for the best results. I don't know much about it or its techniques, but I know that, definitely.
- THE NEW YOUHOSTING COMMUNITY101Gamers
(shameless back linking)