Not fraud. Banks use proxies as a legal loophole to sell unguaranteed investment products that are off the books (i.e. Attractive opportunities they're not allowed to pursue directly). The main side-effect is that clients perceive them as guaranteed and diversified, though they are not actively claiming to be so. The WMP sellers just aren't being transparent, and it is unclear what will happen on a default since the government has a history of stepping in with bailouts.