My first thought is, "This looks like a snippet of code completely made up or taken out of context and then anonymized by renaming variables. I have no idea what it's supposed to do, I have no idea why I'm looking at it, and I have no fucking idea what the interviewer wants form me, and I don't play guess-the-rules type of games." If this were real code, I'd have context. Not just a snippet. I'd see the things I don't see in the snippet, and I'd know why I'm looking at it and what I'm looking for. In real work, there is always a motivation for everything you do. In this case, there is none. You might as well show a sequence of bits. "What do you think of these bits?"
So by your prejudice, you'd probably categorize me in the first camp. Congrats, you probably turned down someone who's been coding for 20 years. Then again, if this really is the kind of line of business code you regularly deal with, maybe it's for the (my) best.
This is a pattern I see all the time. Interviewers come up with their games with their arbitrary rules and a bunch of prejudice about how a good or bad candidate should react. They think they came up with something clever, they always do. They have no idea.
I get the impression that good people get regularly turned down because they didn't guess the rules of the game right, or they don't even play because they got an offer at some place that doesn't play these silly games. Then there is so much complaining about talent shortage, and complaining about terrible interview practices, and complaining about having to deal with a stack of 1000 job applications.