Probably a good move all around, WeWork gets the devalued product on the cheap and Flatiron founders exit and the company can say that under new management things will be different
When the former students are justly compensated for their dashed hopes and tarnished reputations† -- that I'd consider to be "probably a good move all around."
† "Ah, I see you went to the Flatiron School - heard about all the crazy shit that went down there. Which we won't hold against you. But please understand that you'll have to go through 3x as many Dance Monkey sessions as most of the other candidates, just so we can be doubly sure we aren't taking on any damaged good, you see. Oh you've never played Dance Monkey? It's easy, just come to this whiteboard here. Yeah that's right, the one with the squeaky markers, behind the busted swivel-chair..."
The way we define success. The ways we measure knowledge and success in students. The entire system from education on upward needs a good long looking at. Under our current way of doing things (I can only speak for the US) we've realized that throwing money at a problem is not the only solution but so long as delivering "results" is the metric by which grants and money is given to school districts we will always run into people stopping at nothing to meet the qualifications for such endowments.