I think the point is that retail investors were selling the puts, they predictably sold every day (or more likely, they predictably bought calls which is almost equivalent), and there were no other sophisticated market makers in the market.

That changes the description of part 2 to "subsequently experience retail investors placing large options trades with them" which is much more defensible market making behaviour - their early buying was in anticipation of later demand and really did involve taking a risk.

The truth is probably somewhere in between.