It’s quite clear that emulation of Nintendo’s private product is illegal

It’s not.

What is illegal - and what got the Yuzu team who blindly ran into it like idiots despite people warning them about this since ~forever - is making bank from emulating others’ hardware.

In this case, Yuzu made so much money from their patreon that they created an LLC to handle the cash flow. That part in particular made it trivial for a rightsholder - like Nintendo - to show commercial purpose behind the Yuzu project and hence take its developers to court. It’s how they got import injunctions against stuff like the R4 cards, too. Showing commercial purpose is trivial when bloody Amazon is selling your bloody physical product. Or in this case, if there’s a whole LLC just to manage all the money you’re making and blowing on coke/hookers (I don’t even want to know how much money they siphoned off personally if Nintendo could instantly make them agree to >2 mil, they must have a lot of millions around).

and against tos.

That it is, but that’s only grounds for losing online access and shit. Not the same thing as being open to a broadside from Nintendo’s lawyers.

Edit you may have your opinion on IP law, but that’s just an opinion . There’s no way these devs didn’t know they were in a grey area, at minimum.

No, they were fully aware they were in fully illegal territory, IMO.

They have been warned about this frequently since they started their patreon, and recently there was some R4-like action with Switch emulator cards. Which again led to the whole commercial-vs-free discussion for emulators, and they doubled down on their approach and made a company.

IMO, what actually happened is that they set a ton of money aside (we can estimate they got 1.2mil, but I would estimated it at 2x++ that based on how quickly they accepted). They knew Nintendo would eventually sue them. They got the 2.4mil recompensation offer, this is significantly less than they actually made. And hid. So they’re instantly accepting it to “cash out” the rest.