[Lazare]

> People want higher returns without higher risks, and other people can profit from convincing buyers that the returns are higher, or the risks are lower.

That does happen, but what may be even more common (and more important is a slightly different form:

People want high returns, and are willing to accept risks, but are required by law to invest in safe securities, and are happy to pay high fees for people who can find a way around this.

A huge driver of this isn't scams or outright fraud, but "regulatory arbitrage". Not saying it's fine, but if your mental model is "how can we protect unsophisticated mom and pop investors from these predators selling exotic asset backed securities", well, they're not the ones buying them. The bigger question is, how can we (or should we?) stop pension funds from knowingly seeking higher risk/higher return investments as part of their ongoing effort to try and reduce their massive unfunded liabilities.