Fraud or criminal elements are not required. Old fashioned screw ups and security lapses do the job of losing other people's money just fine too. The bond requirements are just a method of basic consumer protection. Money transfers are a serious business with serious consequences, if your investors don't trust you with either the funds for the bond or the payments on a surety bond, you really are in the wrong business.
A surety bond means you only have to pay a small portion of the total. It's similar to insurance. You pay a company with larger resources to vouch for you in case you have a problem. Instead of ponying up (the refundable) $500K you pay something like $25k. You don't get it all back if you close up shop, but you didn't need to put much capital out there. This is how a lot if not most licensing bonds work.