Not only is this FRAUD (similar to using stolen VINs), it conspires against the NFA Act of 1934 and Gun Control Act of 1968 regulating FFL holders.
Basically, these idiots (ON PAPER) were taking this gun, worth $200.00 in 1986, $3,000.00+ today) :
and turning them into much more valuable.....
Thompson Submachineguns that sell for $11,000 to 50,000.00
...and belt fed....
M1919 that sell for $15,000-40,000.00
“The National Firearms Act revision of 1986 made it illegal for civilians to transfer or possess machine guns manufactured after May 19, 1986.” - article
I would like to see one of the prongs of their defense be that they were doing this gunsmithing as members of the unorganized militia, under title 10 of the US code. (not as civilians)
The next line would be that the law fails the equal protection clause, by creating a class of people with more rights than other citizens. (How can a government pass laws that they exempt themselves or some classes of people from?)