In general disability is awarded based on conditions rather than symptoms. Claiming back pain alone for example is not enough to warrant a disability rating. However, if medical evidence shows that something is actually wrong with his back, they may award a rating.

This doesn't necessarily mean that he can't overcome the symptoms of that disability, for example through exercise, surgery, or medicine. The condition still exists, even if it is under control.

Of course it's entirely possible that he was malingering to exaggerate his conditions and get a payment, any time you dangle money in front of somebody that's a possibility. But his current level of fitness in itself is not evidence of this. It's equally, or even more, likely that because he took up athletics and started working out that he's strengthened his back to compensate for the injury. But again, that doesn't mean the condition isn't there, even if it is currently not impeding his function.

To your question though, it's most like not fraud. But the VA does not give temporary disability, because disability is awarded only for permanent conditions, regardless of symptoms. The VA also tends to err heavily on the side of the veteran, because of the danger of revoking claims that are deserved. I tend to agree with them that it's better to allow 1 veteran who doesn't deserve compensation to have it if it prevents 1 veteran who does deserve it from being denied.

The VA already has an atrocious track record with failing to give ratings where they are deserved.