Firstly, get yourself a good specialist strata lawyer before you do anything else.
Then there are two avenues that spring to mind. The first is council planning. If they got permission for a two-bedroom and built a three-bedder, then they are in breach of their planning permission (assuming they got a DA). Take it to council and let them deal with it.
The other is a clear breach of the by-law. I would hit them with a Notice To Comply, in the first instance, then take them to NCAT for fines and then back again for orders when they have (probably) failed to remedy the issue.
Make sure that you also ask for legal costs to be apportioned to them in any hearing so that you can add that to their levies.
You need to act on this as a matter of urgency before chummy sells the property and you then have to do everything through another layer of confusion.
I have no sympathy for people in strata who take advantage of their neighbours’ better natures and then just lie to them and expect to get away with it.