When you say "the system worked" because depositors will get back some as-yet-undetermined percentage of their deposits, that's not relevant to an insider trading discussion -- that's shifting the topic from whether investors in SVB were harmed, to whether depositors were harmed.

I don't quite understand your position on insider trading. The idea behind making it a crime is that no matter how "sophisticated" an outsider is, they don't have insiders' non-public information. Insiders can profit from the information gap between them and the people they sell their shares to. There's certainly disagreement about how to ban insider trading while making it possible for officers of the company to trade at all, but the basis of the law is that no amount of due diligence can undo that imbalance in information.

It sounds like you're saying that one might decide, as an individual, that the system is unfair or imperfect or corrupt, and decide to diversify. That's probably good advice. But that is a practical measure that doesn't really address the problem being discussed.

>No one index investing is going to feel this in a material capacity.

Over what timeframe are you making this claim? A week? A year? 10?

The entire index dropped, driven by a selloff in the Financial Services sector after FDIC placed them on the failed bank list, so in effect it has already affected the index.