Hackers have historically had very strong ideas of morality that extend way beyond illegal vs. legal. This is why some hackers advocate doing certain things they consider moral but illegal, and abhor other things that they consider immoral but legal.
It's thinking like that that makes most people not like Wall Street and businessmen in general. Legal and illegal and right and wrong and not the same thing. Being ethical doesn't just mean following the law, it means following the spirit of the law and not doing things other would perceive as wrong, regardless of the law. It's wrong to cut in line, but it's not illegal, that doesn't mean you should do it. It's wrong to be rude and insulting for no reason to a stranger, but it's not illegal, that doesn't mean you should do it or that it's OK to do it.
Obviously the rules for doing business on Wall Street, where decisions can impact millions of people, and the rules for this business class assignment are going to be different.
But anyway, as long as it's not illegal, I don't see what the problem is. The instructor didn't say how (or even whether) to spend the seed money.
Another way to look at it -- a good idea and good execution can overcome almost anything, even shortages of time and money.