If you're a first year student I think it could be kept between the prof and the students involved. They should definitely fail the class. First year students typically still have a high school mentality because their high school teachers couldn't be hard enough on them (mostly because the teacher's hands were tied with what they could do to them).
If you're not a first year student it should be taken it to a higher level. You should be smart enough to know you shouldn't cheat by the 2nd year and if you're not you shouldn't be in post-secondary education. During the first year of University profs will tell you time and time again that plagiarism and cheating will not be tolerating. You should probably listen to them.
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