> In 2015, the IRS issued guidance here that hedge funds using "basket options" had to report them on their tax returns and correct past returns, which came after a U.S. Senate subcommittee reported some funds were using this to avoid federal taxes.

Tax rules are complicated, and these hedge funds are relying on technicalities to reduce their tax burden. This one didn't work out, but you can be sure their lawyers looked at the code and can say with a straight face that they didn't know how the IRS would rule. That doesn't make you a criminal. It also sounds like they're paying back the entire amount in question, not "a few percent."