Regulation does not guarantee no foul play that’s true. Difference being is that if you do for some reason suspect foul play then at least you have the regulator to complain to in the case of a regulated broker. For some reason or the other this seems to allude people. And the regulators do indeed take action (in the US and UK anyway).
And by the way: it is a misnomer that regulation guarantees security of funds. It has very recently come to my attention that in the US the CFTC only lays down and enforces rules but they in no way guarantee security of funds. In the UK: it is a requirement for a UK regulated broker (FCA) to also be registered with the FSCS and it is the FSCS that will reimburse a client should a broker be unable to meet their financial obligation to the client (up to a maximum of £85 000 per person).
Note also that there is a difference between REGULATION and REGISTRATION. A broker can be REGISTERED within a certain country i.e. permitted to conduct business within that country BUT NOT NECESSARILY REGULATED within that same country.