Isn't it rather patronizing to dismiss "unsophisticated investors" as unworthy of full agency in the stock market? Doesn't "unsophisticated" in this case just mean "they wound up losing money," in a game they voluntarily and without coercion signed up to play?

Suppose instead that the hedge fund had lost money. It happens every day. Would you suddenly start to pity the unsophisticated hedge fund managers being exploited by all those other vicious investors?

I'm not doing anything to prevent unsophisticated investors from making poor choices with their money.

However I do not wish to contribute to making their misfortune even worse than it would otherwise be.

Why would unsophisticated investors lose money? Speaking as an unsophisticated investor, I can confidently say that these rapid trading schemes have not affected my portfolio at all, except perhaps by adding liquidity when I tried to buy or sell equities. Just because this "flash-trading" scheme exists doesn't mean that everyone could or should use it; most unsophisticated investors know enough to stay out of it.

The hedge fund only had one person's money in it. When he made money on a trade, that money had to come from somewhere.

One can make money in the stock market without any trading at all; Merton Miller often emphasized that prices could adjust to new information without any trades taking place, if asset holders and potential buyers agreed on the impact of the new information on the asset value. Trades only take place when asset buyers and sellers have differing valuations for the same asset, whether it be for reasons of uncertainty, asymmetric information, or subjective values. You are also assuming that stock trading is like gambling, where the amount of money at the table is not variable over time (except for players coming and going); this is the zero-sum fallacy.

"assymetric information".

The owner of the hedge fund had a model that was built on decades of CBOT commodities futures prices. His model would buy and sell a basket of about 1000 many times per day. There was some error in his model - at times he would lose money - but over the long run he was able to earn far, far more money than any other fund I've ever heard of.

The stock market is not a zero-sum game because net new money is usually entering the system from outside -- people make money in some other line of work and buy stocks with it.