What is an "illegal egine swap"? I can put whatever engine I want to in my car. As long as it passes the emissions inspection there's not a damn thing anyone can do about it.
Hmm, good question. I can't remember the law. It used to be that the smog had to match the chassis, then it had to match the engine or maybe it was the other way around. So, he could have a 93 Mustang with a smogless 68 302 in it. Nevertheless, that's hardly a reason to crush his vehicle. Give him a fix it ticket.
Now if the engine was stolen, that's different story. There is a problem if you rebuild your engine. On a Chevy small block (big block too) the serial number is on the deck so if you mill the deck it takes off the serial number. You can get the machine shop to restamp the numbers but lack off numbers doesn't mean it's stolen.
I had this issue on my '69 Vette. The previous owner had every single receipt up to around '91 then they stopped. He told me only the top end had been worked on and the block was stock and numbers matching (a big deal for the Vette or classic muscle car crowd). It started running bad so I had a bad hole in #3 so I pulled the head, once I got the head off, it was clear it had 30 over pistons so the bottom end had been rebuilt and decked and the numbers re stamped. I don't know why the previous owner would omit such a thing because they did a great job on the rebuild down to new valve seats and valve guides. The only reason to not say anything was that the block was not numbers matching or original so the car would have been worth less. When I sold it, I had a shop check the block's date code and they were correct so it could have been the original block. I still doubled my money.