AITAH for laughing in my SIL’s face when she DNA tested my daughter?

AITAH for laughing in my SIL’s face when she DNA tested my daughter?
I, 30 M, have a daughter who's 6. I am not biologically related to her at all. There is no blood relation between us.

I was friends with her mother for most all of my childhood. We were never involved romantically and were always just friends. She had her daughter at 23 with her 25 year old husband. When my daughter was a newborn (About 3 months technically) both her mother and father were killed. I won't go into too much detail for privacy reasons, but it was workplace shooting. My friend and her husband had worked in the same building, and were both killed.

Both my friend and her husband had grown up with less than ideal families and didn't have any siblings so there wasn't any "next of kin" for their daughter to go to. However, because I was close with them I was able to adopt her. Even though I had been iffy about the idea of kids I didn't want their daughter to grow up in foster care or around people who didn't have a connection to her bio parents so I stepped in.

My parents and siblings know that my daughter is not my actual daughter biologically speaking. My daughter, I'll call Lily for the post, also knows that she's adopted. I never really hid the fact that she was adopted, she knows her parents are dead and were killed by a "bad man" but I'm saving the details for when she's older.

Lily does not look like me at all. She looks exactly like her mother and biological dad. Most people assume that I'm her bio dad and that she just took after her mom. I don't ever really correct this when and if people assume this because it just seems unnecessary.

My brother has been with his fiancee for about 2 years now. A few weeks ago we were all meeting up at my parents house and my SIL saw an old picture of me, my friend and her husband. She pointed to my friend and asked who she was, and I explained that was Lily's mother. SIL got quiet and stood in front of the picture for a while. I didn't think much of it. To clarify, she knows my friend died, but I guess didn't know that she had been married, or that Lily is not my bio daughter. I suppose she assumed my daughter was mine and my friend's biological daughter.

My SIL got a DNA test done on my daughter behind my back. She used my brother's DNA for the test, and when it came back that they weren't related, she knew that meant me and Lily weren't related. She came up to me with the results and waved them in my face, saying that I was taking care of a dead woman's affair baby. She said this to me in front of my daughter. I just stared at her for a while before bursting out laughing at this.

I told her I knew Lily wasn't my biological daughter, and that this thing called adoption exists. Her face went red and she stormed off. My brother is mad I embarrassed his fiancee, but I said she embarrassed herself by DNA testing a kid that isn't hers and then parading the results up to me. What did she want me to do? What was her goal with this? Did she want me to break down and abandon my daughter? My brother said she thought she was doing the right thing and called me an asshole. I don't feel like the asshole, especially considering my SIL was the one who stuck her nose where it doesn't belong. I'm asking for reddit opinions (mostly just for validation), so was I the asshole?