Player lies at showdown / winning cards touch muck but are retrievable

This is a home/underground room, and everybody is friendly and knows each other.
1/2/5 Five Card PLO, eight handed. TLDR at bottom.

Three players in the hand. Seat 7 is all in on flop, pot is ~$1,000. On turn, Seat 5 checks, Seat 8 bets all-in for ~$300, and Seat 5 calls.

Seat 8 immediately says, “Queen high flush.” Seat 5 waits many seconds and asks, “Do you really have a queen high flush?” Seat 8, while looking at their hand, says, “Yes, I have a queen high flush.”

In the meantime, the dealer has squared the muck/burn with the corner of the bottom card (might be the cut card) sticking out slightly. Seat 5 tosses their hand forward, face down, and one card touches the bottom card sticking out of the muck. Seat 5’s hand is 100% identifiable and the dealer has not touched it.

Seat 8 turns over their hand and they do not have a flush. Seat 5 grabs their cards back to show bottom straight, which is the winning hand. Seat 7 has top set, which is the second-best hand.

What is the ruling?

TLDR: Player lies about hand (twice, once to a direct question) at showdown, winning hand has touched muck but is retrievable and 100% identifiable. Other player is already all in. Ruling?

(Seat 5 knows they should have shown their hand, blah, blah, blah.)