So... as a CFI... this scenario actually scares me a little.
Let's say it was this miscreant's first flight. 2 hours of dual would be a pretty reasonable "first lesson/intro lesson"
I'm thinking about other "first lessons" I've given to interested parties.
I probably wouldn't have covered "limitations" of the student pilot yet.
I certainly wouldn't have chased away a future aviator by diving into part 61 with him.
I'd have done some basic airwork, maybe a lap around the area or catalina and showed the upside of aviation. It'd have been a fun demo/familiarization flight, not a very instructional one.
(I just gave 4 such rides in a Bonanza last week actually, so I'm reflecting on my actions -- luckily they had no access to the plane without my presence
)
... now ...
let's say this kid, when pressed by the FAA, explains that he didn't know about signoffs, endorsements, etc -- and he just joined a flying club "to fly obviously" and "thought that's what he was paying for"
Grand larceny? Out.
Busted by FAA regs? He's hardly governed by them. Easy to say you don't know the 5 pounds of regs after 2 hours of dual. "He never said anything to me about solo endorsements"
like... we've all met those people who feign ignorance.. but... what possible response can the FAA have against the tactic? My thought? Hang the CFI. Someone's gotta pay.
I think the bulk of this person's punishment is going to be in the club bylaws. He owes a deductible maybe, or may suffer expulsion from a club that's down a plane. From my own experience with commercial plane insurance, they're going to send rip taylor down there to throw $100 bills at everyone to avoid risk of bad faith -- so I think the owner and club will be made whole. Insurance will then fail to subrogate. The club will fold from the weight of their new insurance premiums in 2-3 years, or "re-organize" under a new corp, since "new club" rates are cheaper than "club with a smooshed plane in its past" rates.
I'm assuming the 17 year old is not wealthy and somewhat judgement-proof.
...might he just get away with it? I've seen stupider things.