My understanding is that the IA had implemented a digital library, where they had (whether paid or not) some number of licenses for a selection of books. This implementation had DRM of some variety that meant you could only read the book while it was checked out. In theory, this means if the IA has 10 licenses of a book, only 10 people have a usable copy they borrowed from the IA at a time.

And then the IA disabled the DRM system, somehow, and started limitlessly lending the books they had copies of to anyone that asked.

I definitely don't like the obnoxious copyright system in the USA, but what the IA did seems obviously ~~wrong~~ against the agreement they entered into. Like if your local library got a copy of Book X and then when someone wanted to borrow it they just copied it right there and let you keep the copy.

ETA: updated my wording. I don't believe what the IA did was morally wrong, per se, but rather against the agreement I presume they entered into with the owners of the books they lent.