It doesn't say much for society's conception of value that there's more money to be made through finding ways to squeeze more revenue out of socially useless financial transactions rather than by solving real problems.
But we don't know if that is true. The old societies that didn't have those financial transactions were objectively pretty terrible and not the sort of place any of us would choose to live. We're using the same people as back then the only changes are systems and research. Writing off the major control system is hasty!
It isn't always good, but having the smartest people choosing what does/doesn't get financed and what amount of effort to dedicate is, fundamentally, extremely socially valuable. Notwithstanding that this particular case which is a scam in anyone's books.
Plus, globally, compare poverty in Asia then and now and the difference is astounding. That was enabled in no small part by these faceless megacorps.
There are occasional scams like this in financial services, just as there are occasional scams in any industry. To uniquely demonize financial services as a result is not fair.
I'm thinking more of things like hedge funds, HFT outfits, and the groups that devised synthetic mortgage-backed securities, that put ivy league-level talent towards socially useless and/or economically dangerous activities.
We'd all be better off if the people with the quantitative and social skills to be effective in these spaces put their talents towards things like carbon capture or battery R&D rather than e.g. finding ways to con people into pouring money into hedge funds that under-perform the markets.
The alternate reality you imagine, with no hedge funds etc, can not exist. The only alternative reality that can plausibly exist is a significantly more inefficient investing and trading sector that sucks more talent from the economy than it currently does.
Their business model is to draw in investors who are willing to pay extremely high fees in exchange for the hope of beating the market. In practice, hedge funds underperform the market, so their investors are paying fees for nothing. The only winners are the hedge fund managers. Enriching people for providing negative value to their customers isn't socially useful.
Along similar lines, the crowning achievement of the synthetic asset quants was the creation of a mountain of toxic three-card-monte mortgage debt that exploded in 2008, bringing down the global financial system, crashing the world economy, impoverishing hundreds of millions of people, and creating the political environment that lead to both Trump and Brexit. Blowing up the world certainly isn't socially useful.
I don't see any downside to reducing the FIRE sector's share of GDP back to what it was in 1960. The economy worked for the median person then; it doesn't work for the median person now, and the amount of wealth the FIRE sector sucks out of the economy to pay for these kinds of games has a great deal to do with that.
I'm going to circle back to what I originally said. The alternative reality of zero hedge funds is not a reality that can possibly exist. The reason it can't exist is because the lack of hedge funds will create edge in the market, which will incentivize the creation of hedge funds (or other trading companies). So, given that zero hedge funds is not possible, then what is the best thing for society? The answer is that we want the best and most efficient hedge funds to extract all available edge with the minimum possible resource input. Once this happens, we achieve perfect competition and new talent no longer had an incentive to perform this activity and can go and do more useful things for society. This is the value add of hedge funds in our society. If we have one good hedge fund that extracts all edge, then the thousands of other would-be investors and traders can now go off and be scientists or engineers.
A talented person will make as much money or perhaps more money in software engineering than financial services. Most people in financial services make very little money, 60k-150k being a common range.