If we take what they're saying as fact and that they didn't copy and paste the code, but for all intents and purposes the LlM basically did reproduce the same code based on its crawling of the repo and not respecting the license. It would make a great civil case for the courts to decide.

Their defence seems to be "well we asked an LLM to reproduce your work, so 'WE' never copied your code". Smells bad to me.