Welp the accusations started so I might as well stop dancing around it.
He should know that if that IS AI-generated and he's claiming its not, then it'd be significantly better for him to own up to it being AI than continuing to pretend it isn't.
The game's already in a shaky spot. And if he did in fact use AI to generate a reference sheet and proceeded to claim he "drew over the resulting outline" of a "remove everything but the outline filter." Is just not it and will only result in more people losing faith in him. I mean sure, I guess there IS the chance he drew it himself, buuuuuuut, it does look like some AI anime images I've seen a million times by now, doesn't it?
The way I see it, Arc pretty much has only 2 options here:
Option 1 - Continue to deny that it's AI and find a way to prove, definitively, that it is in fact hand-drawn. A surefire way would've been to record himself drawing it. If he AI generates a video of him "drawing it," then that too will come with inconsistencies that can and WILL be pointed out.
Option 2 - Admit that it's AI generated and deal with the fallout.
Either way, it's not looking good for him.
Also the 2nd image of "Gwen that isn't Gwen from Corrupted Kingdoms" looks closer to what a rework would've been. Moderate model changes, hair changes, and outfit changes. Like what FrostMist did to Noemi in his game.