I think the biggest problem that we at APS have with this crime is that we all find this ass-hat's actions to be morally reprehensible to the highest extreme. To claim the title of "hero" when you did nothing more than buy a medal at a surplus store violates all of our basic ethical constructs, that real heroes are to be respected, shown the appropriate gratitude by those for whom the hero acted, and a tear shall fall from our eyes when his/her acts are recounted.
That said, at least here in Ohio, "defraud" as defined in section 2913.01(B) means to knowinglu obtain, by deception, some benefit for oneself of another, or to knowingly cause, by deception, some detriment to another. Regardless of what this guy may have done, the law as written, and cited to by the judge, does not require the government to prove any benefit to oneself, or detriment to another. Claim to have earned a Bronze Star and you are guilty under this law, even if, for example, you are doing nothing more than trying to impress a young lady in a bar. Now the Judge here looked at this and said "what interest does the federal government have in regulating speach in this manner, to prohibit anyone from claiming an award, if it never gets to the point of criminal fraud? Just to regulate the speach alone? To stop guys in bars from claiming to be heroes to get a little action?" The judge here said there is no real federal givernmental interest, so the law is unconstitutional.
What I really found interesting is that we so rarely see this argument made with respect to federal laws, or when we do see it made, the old "commerce clause" comes out as a catch-all to save the day...