If the custodian gives you $7,000 and says that you will see code 8 on your 1099-R (taxable amount zero),
then what's the problem?
OK the custodian gave you more than they should have.
That's not your problem.
I don't see anything fraudulent about it. Your IRA is now smaller than it otherwise would be.
On 1040-X either way, you attach your corrected Form 8606 ($7,000).
@shr22
