Since there is no law about claiming to be whatever degree you want, whether or not you've earned it, instructors can get away with it although sooner or later they will be exposed and smart students will not train under them. As you said, careful investigation and good research is the key. An experienced martial artist usually would know the difference between a real instructor and a fake one but for somebody just starting out it is easy for them to be duped. As for me, I don't really care much if an instructor has a high dan rank or not as rank at that point just becomes political. Having good skills and being a good teacher is what I judge an instructor on.