YC funds enough founders now, with few enough partners, that it's entirely possible for someone to be doing something sneaky and YC wouldn't catch on right away.
Initially, YC just has the business model / product description statement from the founders, a video (do they still do that?), an MVP if one exists, and maybe a meeting with the founders.
The only way this could really negatively reflect on YC's integrity -- if that's up to us to judge anyway -- is if the accusations turn out to be true and YC either chooses not to investigate or chooses not to counsel the founders against doing something like this. (Remember, YC does not have a controlling interest in the teams.)
Since pg has said they're checking in to it, I don't think "YC is turning evil" is a reasonable narrative here.