I don't think he knowingly cheated either. In 2011, the USGA amended a rule for things like this that penalized 2 strokes instead of a DQ. However, this tournament has their own rules committee and abide by them, not the USGA. The whole question is which of the three options did he choose to drop from?
option b is the one he should have chosen...b. Drop a ball behind the water hazard, keeping the point at which the original ball last crossed the margin of the water hazard directly between the hole and the spot on which the ball is dropped, with no limit to how far behind the water hazard the ball may be dropped.
Problem here is he did not choose that one.