Exactly why we have interview problems in engineering. I respect engineers for having opinions and ethics and they should lean on them, but to bar one from employment because they were doing their job is wrong, immoral, and potentially illegal.
Where have we heard that one before?
I've personally been disqualified because I've worked at a legal, but "vice" based company - I've seen others not hired because their previous company was too "legacy", even though they did very similar work.
It's not necessarily right, but companies use the signals available for them - even if they're not 100% agreeable to everyone.
At that point, I was conducting dozens of interviews a year, and I think that sort of question came up... maybe three times? One of those people was from a medical company with a very large and very embarrassing contemporary incident, and the interviewee and I talked about development process problems. In fact, they admitted, it was part of the reason they left! We hired them and I enjoyed working with him.
And fine, but then when that horrible thing makes the news and their answer is "i don't care, i was just building the feature", I take that to be an extremely unsatisfactory answer.
And if they work at Facebook with those kind of unsatisfactory answers, they are probably very qualified for a lot of positions, and I don't think they'll be hurting for job offers elsewhere.
Doctors are often required to attest their ethics before doing a job.
Maybe the difference is that (computer-based) engineers are expected to do unethical work in some situations and for some employers, and there is an unwritten code that they can pass the buck and won't be penalised just for "doing their jobs".
I, personally, would have done the latter in that scenario, but only if that entry was on their resume and they were proud of it. So no, I wouldn't report someone who personally confessed that many years ago they were dealing or doing sex work of the illegal kind. Though I heavily doubt that someone would be dumb enough to put it on their resume and advertise.