Well… yes it’s hard to beleive but let’s put it a different way…
Sega probably realised it would cost them less to offer them so-called ‘stock options’ which doesn’t necessarily mean anything too worthwhile, than to file an expensive lawsuit against them which would also cost money to track them down.
Sega may have realised that these guys have some serious talent and know a lot about the Dreamcast, it’s hardware and software, and have superb ripping techniques- all in all could result in some use if they had them on their side instead of ours. They might be able to provide Sega with tips on how to copy protect their software in future, etc.
But… I think all the cracking has done Sega GOOD! Why? Because so many more people have bought the Dreamcast now they know they can either download the games of the net or buy them cheaply from Warez CD stores. I know I’ll be buying one…