Terms of service might matter more for terminating that user account. Whole ordeal is just plain copyright violation. The author had no licence to that internal code, and whitewashing it with LLM will achieve nothing. That case is much clearer than that recent GPL->BSD attempt story.
I think it comes down to the company's appetite for legal action, doesn't it? This case is imo pretty clear but the vibe has quite the smell of Oracle v Google to me.
But, yeah. More than likely this case is a simple account termination and some kind of "you can't call your clone 'openviktor'" letter.
If LLM-generated code isn't considered a derivative work of the original, then whether the author was licensed to use the code doesn't matter. But I'm sure the courts will rule in favor of your view regardless. Laundering GPL is in corps' interest and laundering their code is not.