That is what literally the reason why although bitcoin is very tempting to get involved with but every time bad news like above appears, it will make you think 100 times before getting involve with something that business and financial leaders consider fraud or illegal. Scary isn't it? Am actually scared of the flash crash even if am not hoarding or trading bitcoin.
I think the best way is to invest with bitcoin the money you can afford to lose, so that if flash crash will happen, you wont feel any pain or regrets.