If these were regulated exchanges, shit like this wouldn't happen. That simple.

Every single market in existence works like this, regulated or not.
It's normal business in any other asset class too.
Not to the same extent, no. Exchanges have access to much more information than the punters, and, without regulations, exchanges would be foolish not to use it. Playing this market is like playing poker against the house, with the house being able to see all (okay, most of) your cards. You can still win, but it's not really poker & the odds are against it.