Well if you'll notice he's wearing an arkham inmate uniform. In the end of the episode Lock Up he believed he was sane and 'watching' the lunatics. In a review I heard a description that I like: It's like puting the Punisher in prison. (Not a good idea)
In BTAS they never mentioned him again, so in my continuity, he was eventually transfered to somewhere else because he was too violent. And In Year 2 he was transfered back to Arkham, still thinking he was keeping them under his guard. And when picking fights Kim decided to kick him in the back of his head.