Can my old school be responsible for malpractice?

What your counselor did was incompetent, but not illegal. Don't focus on past issues that can't be helped now. Focus on your bright future. If you had a great first year at university, you are already well on your way to overcoming those old problems. If you can't sleep, it is because you are harking back to a time when you had no control over your life. But you do have control now, and you are obviously not destroyed. We can't always choose our circumstances, but we can choose our attitude toward them. You are to be admired, not pitied.