The reason for the ticket seller getting an exemption from ATOL regulations is that the passenger at the point of booking gets a ticket on a named airline. If the ticket seller goes out of business the passenger should still be able to turn up for their flight.
However, this ticket seller has gone out of business, the airlines instantly vanish and the passengers don't know where their money is.
This shows how much this was an abuse of the intention of the regulations and how badly the regulations were written to allow this to happen.