In theory it should, but in practice they don't: FTX was licensed and regulated, as were JP Moran, Duetshe Bank, Goldman Sachs et al. who were being audited by the major 3 rating's agencies and were all rating their investments tripe A despite being filled with NINJA loans, who they had simultaneously bet against in order to profit from their invertible failure (CDS). All of whih led to an economic collapse which we never recovered from and still deal wit to this day.
I wish that regulation alone was the way to deter these things, but all it does is lead to more entrenched regulatory capture which leads to less competition to the incumbents. And before you start with, well SV funds disruptors let me remind you how Sequoia was one of the biggest backers of FTX/SBF.
Again, if taken to it's logical conclusion regulation alone doesn't do what it states it will do, all it does is create more moats that must be guarded by various gate-keepers ebabled by regulations who only let those with the right connections, academic credentials, family connections in thus further enforcing the kleptocratic-aristocratic way of doing things and thus 'business as usual' remains with only a thin veneer of governance is applied.
If it wasn't SBF that did this it would have been Blythe Masters, who was ousted from JPM for her failure to corner the food commodities market via derivatives, or one of her cronies as she and her cohort entered the crypto space in 2014 or so.