Well, a LOT of crypto investor are limited means and the least likely to be able to afford to lose it. Sure they shouldn’t have risked their life savings, but they aren’t getting ahead in normal ways so they hooked onto this rocket, and FTX was considered safe and above board for a long time.

There are real mental and physical impact to loss of majority of your wealth, which can lead to homelessness, exhaustion from working more to cover shortfalls, marital strife, abuse, suicide.

Considering this wasn’t just insiders like high net worth investors angel investing, but everyday people, yeah it hurts a lot of people in real ways. Probably a lot more than the Madoff crowd for example.

It's more that, if you take a meaningful amount of money from N people, the likelihood of financial hardship putting someone in mortal danger (eg, by causing them to lose access to housing or medication, or causing them to be suicidally despondent because they've lost their ability to retire) approaches 1 as N increases. When N is high enough that there are multiple people in mortal danger - it becomes pretty likely that some of them succumb.

This is even discussed in the film version of The Big Short.

Do you routinely evaluate the contents of a wallet stolen by a mugger or of a car stolen by a carjacker in this way?