> Ferrari got caught doing something illegal so their engine has been nerfed.
just a clarification, Ferrari has not been caught doing something illegal, they signed an agreement on how to handle the engine in exchange of some kind of assurance by FIA that won't happen again.
The story says someone inside Ferrari told FIA that the Ferrari engine might not be 100% legal, FIA started an illegal investigation that also involved spies inside Ferrari's factory and industrial espionage, but nothing illegal has been officially found, it would have meant for FIA to admit they ran an illegal operation.
That's how the new Ferrari/FIA deal was born.
Problem is every team is doing something the regulation does not permit, FIA has not enough people to check everything and probably not even the know how to understand exactly what's going on, cars have become too complex, but if you go slow nobody cares. See Racing Point breaking system affair. It's illegal for sure, but no fine has been issued because they need racing point to be there and fill up the grid.
On the other side, everybody knows that the "over 1 thousand" horsepower Mercedes engine is doing something not completely legal, the new regulation for this year were made explicitly to avoid having engines too powerful and 1 thousand horsepower was considered an hard limit, impossible to surpass, by FIA engineers, yet Mercedes it's around 1,020 .
But admitting that the multi championships winner is cheating, after an investigation that without informants with very specific insider information could take years, would mean casting a very bad shadow on the entire F1 circus.