Convicted? No.
On trial? Yes.
The police had irrefutable evidence taken from his home, that Freddy had killed the children. Unfortunately in their haste to catch Freddy, the police hadn't got the search warrant signed properly. Therefore any evidence they did have was inadmissible.
Krueger laughed and gloated as he was set free. Everybody knew he'd done it, but there was nothing they could do about it. At least not within the confines of the law.
So the parents did what they had to do. They found where Krueger was hiding, and burned it to the ground, murdering him in the process. The cops and judges, many who had children themselves, looked the other way considering it for the greater good.
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