By keeping the paper, UMN is benefiting (in citations and research result count). Universities are supposed to have processes for punishing unethical research. Unless the University retracts the paper and fires the researcher involved, they have not made amends.
"It was my brother on my unsecured computer" is an excuse I've heard a few times by people trying to shirk responsibility for their ban-worthy actions.
Geographic proximity to bad actors is sometimes enough to get caught in the crossfire. While it might be unfair, it might also be seen as holding a community and it's leadership responsible for failing to hold members of their community responsible and in check with their actions. And, fair or not, it might also be seen as a pragmatic option in the face of limited moderation tools and time. If you have a magic wand to ban only the bad-faith contributions by the students influenced by the professor in question, I imagine the kernel devs will be more than happy to put it to use.
To continue the analogy, it would be like finding out that the offender’s friends knew they were going to do that and were planning on recording the results. Banning all involved parties is reasonable.
"... planning on recording the event to show it on YouTube for ad revenue and Internet fame."
In this case, the offender's friends are benefiting from the research. I think that needs to be made important. The university benefits from this paper being published, or at least expected to. That should not be overlooked.