My first question is how the government could let the app/arrangement happen in the first place. I'm guessing they thought it was "just an extra layer before hi

My first question is how the government could let the app/arrangement happen in the first place. I'm guessing they thought it was "just an extra layer before hitting the real bank," which is what I assumed everyone was thinking when they deposited their money. When apparently it's "not quite", then I guess it's illegal?