You are obligated to report it, even if it isn’t on your transcript. However, if it was bound to happen, you’d want it to happen freshman year. Keeping your nose squeaky clean going forward will help your case. A big mea culpa and a “I learned my lesson and have significantly matured in the three years that followed” can go a long way. I wouldn’t use the words, “I was set up” so much as “I was unbelievably naïve”. If you can demonstrate that you learned your lesson, the effects on your application should lessen considerably.