The software their modchips used (called SX OS) took a lazy shortcut that also effectively means it embedded chunks of the Horizon operating system that the Switch uses (the filesystem module to be exact), combined with embedding gamecard headers in the software to trick the gamecard firmware.
It also embedded a massive chunk of the free CFW Atmosphere (which is GPL2.0-Only, with some modifications), and they obviously never open sourced it.
So yes, they were effectively selling their customers (modified) copies of Nintendo's software.
Xecuter for some reason decided to also sell access to game dumps instead of just modchips/flash carts. IIRC it was never proven that Bowser was specifically involved in that part, but the group did it for sure.
