What exactly does this mean?

When you host a tournament, you're supposed to be providing a service for the community. Not make money.

So let's say you run a tournament with 20 players, and the entry fee is 5k. The prizes should equal 100k. If you make first place 60k, and 30k for 2nd place, that's a fraudulent event because you're pocketing 10k.

That's one of the many ways. Another could be promising something as a prize that you then can't produce. Another would be misusing your powers to change the rules of an event whilst in progress in order to change the results.

Just a few examples.

Alright, thanks. Was just wondering since it was something I had never saw as a ban reason before.