In Canada, I think degrees would be revoked if there was clear evidence that students actively participated in the fraud which obtained their admission. But in this case it seems that most students were unaware of what their parents were doing; we would probably revoke admission for any students who hadn't completed their degrees, but not take away anything they had achieved while at the university. (And they would be free to apply for re-admission -- and almost certainly get it, if they had good grades in the courses they had completed so far.)

Ultimately it would come down to the lawyers and courts to work out.

Would the courts get involved? In Canada, absent clear signs of a defective process, courts are extremely unlikely to overrule universities on academic issues.