Credit default swaps not saving Greek investors

The infamous credit default swap is not saving "investors" (aka speculators) in Greek debt. The Greeks are broke and will not be able to pay off their debts. Everyone knows this, and has known it for a long time. Desperate Greeks are offering 8,9,10 percent interest, which is a helova lot more then you get for investing in US treasuries. So a number of gullible Euro banks have been buying Greek debt and hedging the risk by purchasing "credit default swaps" (CDS) on the Greek debt. A "credit default swap" is like insurance, an equally gullible bank or insurance company offers a CDS which works like this. You pay me a hefty premium up front, and if the Greeks default, I'll pay you what the Greeks owe you.
With connivance of the EU central bank, the Greek debt holders are being coerced into "extending" the maturity of their Greek bonds and accepting less interest. In short, the Greeks don't pay, and they cut the interest rate. The lucky gullible investors find that the CDS won't pay off until the rating agencies (Standard & Poor and Moody) declares the Greeks in default. So far, the rating agencies are claiming the Greeks aren't defaulting, so the CDS's aren't paying off even as the investors are getting a haircut.
All is not bad. Investors should not be pouring valuable capital down the drain by investing in Greek debt, they ought to be investing in things that make money and provide jobs. Having the gullible investors who thought they could reap high interest risk free get skinned will wise up the rest of the bunch.