Fraud & misrepresentation is rife in SL. Always has been. There's a person I have known in there for years who has been manipulating rather colorful fabricated circumstances both in Rl and inworld using several avatars. Playing the victim is a career for some people and though mostly pathetic and sad, but at times it can impact others or businesses negatively.
They typically prey on the more naive and once they bleed them dry of what little emotions or pennies they have, move on. In the case of the person I mentioned, over time they manipulated thousands of US dollars out of people in SL. But you can only keep up the charade for so long and as they were exposed and funds dried up in SL, they have gone on to other places on the internet where we have seen them make at times, hundreds of dollars off of fictional incidences.
And thats all you can do, really - wait for them to move on. People who live in those kid of sad existences will always make exposing mistakes.
Are they criminals? Yes but unless you have their RL information and can serve them with a cease & desist, getting LL involved is unlikely. If you are that passionate about the situation, create a blog with all the factual information that you can point people to as needed.