The flip side of this is:

“All purported students are recorded at some point or another fully going along with the pay-to-stay scheme.”

There are both audio and video recordings from the president’s office in New Jersey, when students called or visited, Mr. Phillips said. He personally witnessed some of these exchanges, and heard students admit they knew the university would not have classes.

If that's true, then it's going to be hard to convince a judge that the student thought it wasn't a scam. Clear evidence of the student agreeing to attend the university even though it would never host a class is hard to refute.