I would imagine at many or most big sports schools, it is the latter.
Actually, I wouldn't be surprised if it's the latter at UNC too. If so, UNC has done a world-class cover up so far by making it look like the former.
You don't really know what happened, but the eventual conclusion that most would take is:
1. he got a passing grade in spite of irregular class attendance. This is highly unlikely, but always seems to be the first place people go because "athletes get treated differently."
or
2. he got a late drop - which some consider "unfair," even in the light of late drops being available to any student for a whole host of reasons (For example, I dropped an entire semester due to depression, well after the drop date)