Irwin, by your definition, any early stage company is likely a fraud because of a material chance of failure. While I don't agree with that definition, less sophisticated investors might. Most don't *really* know the risk differences between investing in Unilever or investing in this cool little kale chip company on CircleUp... and certainly have no good way of understanding valuation and liquidity options.
But, again, I think you conflate crowdfunding and early stage investment. How much due diligence goes into most <= Series A investments? Not much because the amount of money they're raising can't possibly support the level of diligence a public offering gets. Don't blame crowdfunding for this fact and certainly don't call it fraud.
As far as traditional financial institutions being primarily motivated by their investors' success... HAHAHA. Funny.