As a private pilot who is considering building a kit aircraft, this is certainly true. It can be exceedingly expensive to prove safety standards have been met for new designs, which is why so few new certified aircraft are on the market and old designs are so expensive. This leads to the whole industry slowing to a crawl. But that absolutely doesn't mean safety standards haven't been met with new designs.
However, if I build a kit plane, the FAA will require it be emblazoned "Experimental" and commercial activity - such as paying passengers - is forbidden.
I hope the paying customers of this sub were well aware of the level of risk they were taking.
All that being said, I'm supportive of anyone's right to go and build a contraption that may end their life, so long as they don't take anybody or anyone else's property with them.