VMware has recently released a new KB 65207 warning about this issue.
Normally, all powered off VMs would be unregistered from vCenter when you remove a parent folder that includes those objects using the vSphere Web Client. The same is expected in vSphere Client.
vCenter logs similar events when the folder object was removed in vSphere Web Client or vSphere Client.
In my case, vCenter generated two events – one for deleting the folder, and another one for removing TEST-VM-02 from the inventory.
The only difference is that vCenter deleted TEST-VM-02 from the corresponding datastore when removing TEST-Folder from the inventory. Moreover, no events are generated during the delete operation!!!
This issue affects both VMware vCenter Server 6.5.x and VMware vCenter Server 6.7.x.
Workaround (provided by the vendor): Use the vSphere Web Client (Flex) for unregistering all virtual machines in a VM folder or move the VMs from that folder before removing it.
22/01/2019 – Update 1: This issue has been resolved in VMware vCenter Server 6.7 Update 1b. Please see the release notes for more details.