I'm sure reporting someone dead break some state laws, but they didn't have to do it officially because he sold him pictures prior death, so that could just announce it in media without notifying state officially, but I'd expect people would ask about funeral which would cause problems with lack of body.

I don't really see it as fraud selling his pictures since as they said they are genuine pictures, only difference being their inflated value due to his death, but is it illegal though, the pictures are always same and only their percepted value had changed because of external factors, which didn't really make fraud. The value could as well remain same, I'd call it just successful marketing campaign.