I believe this is the same internal design as the HOG D1 and the Deep Six regulator. Perhaps someone can confirm.
I just rebuilt my US Divers Aqarius which is an unbalanced piston regulator.
I believe that it could fail closed in at least three ways:
1) Broken main spring. Since, like many piston designs, the adjusting spring applies closing pressure on the piston, I believe this would result in zero air flow.
2) Stuck piston due to adhesion of the piston o-ring to the wall of the regulator.
3) Clogging, at least in theory.
It depends on the design. I haven't had my D1s all the way apart. On my Conshelf regs, there's a pin that pushes the seat open. If that breaks, the reg could fail closed. It is possible for the seat to become delaminated so that it doesn't open when the pin pushes on it. Clogging would appear to be theoretically possible.