What people are pointing out is that nobody outside of this batch in Y Combinator has seen the paperwork, so nobody can actually verify that there isn't something hidden or sketchy present.

I trust Paul implicitly, and I suspect most YC Founders do, and that probably has a lot to do with the acceptance rate. I wasn't in the meeting obviously, so I can't know how I would have reacted to the specifics, but I can say knowing only what I know now I probably would have at least taken the weekend to do my homework.