It was a shady move to try to pass it over as stock with BMW but I don't think I would call it fraud. If you truly believe that it was a manufacturing defect and you had been honest, you'd be in the clear but what you did was in a moral gray area IMO. BMW, by law, cannot deny warranty coverage unless they can prove that the modifications caused the failure. Even if they can, the law requires them to reach a settlement with the owner. You could see how this could turn into a big fight but BMW may take a portion of the responsibility after a lot of time, effort, and probably money. If any of the emissions equipment fails due to modifications, that sways things in BMW's favor in the eyes of the law. If you modify emissions equipment or your part causes an emission related failure and they can prove it, they can void your warranty.
That's not the point though. I'm sorry to hear about your misfortune but this is a risk you take when you boost a car like this IMO. There are too many variables and unkowns to pin this on anyone financially so, at the end of the day, the risk lies solely with the owner IMO.