Does gold not work if the exchange it's traded on is fraudulent? No, it can still be held and traded peer to peer, and it can still be used in manufacturing.

You're conflating the market with the actual network. The Bitcoin network works just fine.

They have long offered low trading fees, while heavily inflating on-chain withdrawal fees and duping users into accepting "wrapped bitcoin" instead (that is, a layer of misdirection and nonetheless custodial bitcoin, held by Binance or some other third party).

If what the SEC allege is proven, that they moved customer coins to a separate legal entity, I don't think it's a leap to assume the coins users think they're buying perhaps don't even exist - that the exchange have been selling paper coins banking on that users won't withdraw en masse.

This is what FTX were doing too - selling paper bitcoin; bitcoin that was not backed 1-to-1 (or anywhere close, they actually held a relatively small number), instead funneling customer money into the hundreds of other coins FTX had invested in.

This could reveal the apparent mass susceptibility for VC backed "cryptos" - that the masses are not so dumb after all, or at least not in the way you thought, that instead they've been fleeced.

Bitcoin may still suffer reputational damage in the short term, but surely the elimination of such schemes is, to use an overused phrase that seems very apt now, good for bitcoin?