If he continues to receive benefits based on the false pretense that he did not have a pre-existing injury then yes he should be worried.
This post is for information purposes only and does not constitute legal advice, nor does it establish an attorney client relationship with Mr. Cassara.
Presumably, he disclosed his prior service surgery to his recruiter and to the doctors that performed his pre service physical? If he did so, and he was still accepted to the military, he should be fine. As long as be did not make any false, deceptive, or misleading statement regarding his pre service surgery or medical condition, he should be fine. The military made a decision to accept him and he further exacerbated an old injury while on active duty. The VA presumably made an independent and inadequate decision regarding your friend's disability rating.
If the VA vis a vis the US Attorney's office is now contesting his disability and charging him with fraud, he needs to hire an attorney ASAP.
You're a good friend to be asking this question for him. Please wish your friend good luck.