The lack of transparency in financial services - banks - was the whole reason Satoshi created Bitcoin. The people who choose to use FTX over a blockchain are either ignorant, not understanding their coins are insecure, or willing to take on additional risk to save a few dollars and trade a little faster. They are probably regretting it now that FTX is blowing up.

And speed and costs are already a solved problem - see L2 rollups.

>How would blockchain be used to fix this?

All of the things that are being reported on this situation would not have been possible on a DEX.

Decentralized exchanges (DEX) exist on-chain. They incorporate automatic market making (AMM), not a third-party market maker with an association to the exchange. The DEX does not have custody of user funds, and it would be impossible to hide a multi-billion dollar hole in an exchange's balance sheet.

The birth of the stock market also created new avenues for fraud that did not exist prior. This is a new asset class, poorly understood and poorly regulated, and still ripe for abuse.

DeFi would solve some of these problems by shifting the counterparty risk from a man named Sam to an immutable protocol that we can all audit and verify. Look at aave, compound, Uniswap.