Is lying where donations go fraud?

Ok so on this minecraft server the server makes about $1000 a month. The actual server itself costs around $400 to maintain with all the other services. The owner of the server says that extra $600 was going towards paying someone else to make and fix plugins. While I was snooping through stuff I found out by one of his friends that he is actually pocketing money. He says that all donations go towards the SERVER and he pockets NOTHING. So would this be considered fraud?

It would depend on what he said exactly. It's unlikely that he is claiming to be a charity, and a vague statement of "the money pays for the server" could easily include some of the money is a paycheck for the server admin.

That sounds pretty vague. It's not like a charity or anything he's just saying it goes to the server. Who knows there may be other operating costs your not aware of.