Why do the guards support the Tiefling child thieves ring? (Spoilers)

So, I’m playing BG3 with my brother in co-op and we did things the “proper way” by saving Arabella and then saving the other kid from the Harpies to find the secret entrance to the thieves hideout.

But in my solo game I found the hideout with a simple perception skill. I wandered inside and one of kids tells me I have the count of 10 to get out. Do I listen to a 10-year-old threatening me? No, I do not. They’re also a thieves ring so I couldn’t give a damn.

I leave and a guard comes up and says I’m to go to prison for “harrassing” children. No dialogue mention of literally having saved Arabella 10 minutes ago. No persuasion check except an impossible 20 die roll.

After failing that it’s either go to prison or fight. And am I going to prison because I found a thieves hideout in town? No I am goddamn not.

Fight starts and every NPC within 20-30 paces joined in so it’s about 7 on 4. Playing on regular difficulty so I kite them back a bit and then begin the slaughter. Several NPCs, including main character Wyll, gets killed. Then the shopkeeper joins in and I begin whittling him down. He begins screaming at me to stop (there no stop in combat?) or his friends will chase me down and kill me.

After everyone is dead I get a great stockpile of loot. However I am now down a follower, potentially a few quests, a shopkeeper I am always using in my co-op game.

I go looking for the kids to put them to death but they’re immortal and simply run away.

Thoughts? Why would the guard listen to a known thief? Am I missing a lore-friendly explanation? Is this a bug?