Now, I think what I am going to say is going to be highly unpopular.
"I dont know how the directors/management etc of companies like SFT who took these peoples money knowing the ship was going down sleep at night."
This is how most businesses trading in a difficult market situation will act. You try to keep trading as long as possible hoping that the situation will improve quickly enough so that you will NOT go out of business. If you stop accepting new students you will go out of business sooner - people will still suffer except they will be a different group of people. Some students at SFT will have completed their courses because SFT managed to keep trading long enough by enroling new students, thus maintaining some sort of cashflow. Your money will have at least helped someone complete their course - which of course is of no help to you!
Quite simply it is a case of cashflow, cashflow and cashflow. If you are offering a service product which covers a long period of time (more than a year for an ATPL course) you have high fixed costs (aircraft leasing, maintenance, rent and rates, salaries, etc and comparatively low variable costs (fuel, landing charges, etc). If you suffer a period of low course intakes then you still have to meet all your fixed costs. Therefore the £50,000 you paid upfront for your course has already been spent before you have completed your course. It is money coming in from new students that pays for the end of your course. If all goes well the cycle continues without anyone getting hurt. However if the period of low course intakes is extended the cash coming in is now not high enough to cover the cash going out. However you keep going as long as possible in the hope that the situation will improve in time.
If cash was ringfenced (ie YOUR £50,000 was only used to pay for YOUR training and for nothing else) no company could operate under such restrictions in a period of low intakes. They have all their fixed costs to pay but they cannot pay them because they can only access, say, £2000 of your £50000 that month and, because they did not enrol many students on the last two courses, there are not enough £2000s to cover that month's costs. No business could operate like that.
Maybe the solution is to have the CAA introduce a bonding system similar to the system they imposed on ABTA in the 70's after the failure of Court Line. That is, FTO operators must either lodge money or a bank guarantee with the CAA sufficient to pay for the completion of training of exisisting students at other FTOs if they fail. However, putting so much money upfront may aggravate an already difficult financial situation and lead them to close down sooner!
It is a problem with no obvious solution.