Copper is the proven treatment for velvet.
Formalin baths will may dislodge some of the attached parasite (feeding stage) but unfortunately returning the fish to the tank will lead to reinfestation as the velvet parasite (cyst and free swimming stage) is in the tank. Formalin should not be dosed in the treatment tank but only baths as it can "strip" the water of oxygen. Fish with parasites are already oxygen deprived due to parasites in the gills and increased metabolic rate due to stress and increased "work load" to breath.
Treatment should always be done in a bare bottom tank with no porous materials (rock, etc).
Best preventition for disease - Quarantine everything wet (rock, inverts, corals, algae, fish, etc) for a minimum of 6 - 8 weeks.