This is an urban legend. No reputable source claims Joseph Smith was ever convicted of fraud.
Edit: I have removed my elaboration as it appears that this issue has now become controversial.
https://byustudies.byu.edu/showtitle.aspx?title=5004 :
Peter Bridgeman, a nephew of the wife of Josiah Stowell, presented a written complaint against Joseph Smith at South Bainbridge, New York, which led to his arrest and trial as a “disorderly person.”
http://en.fairmormon.org/Joseph_Smith/Legal_issues/Trials/1826_glasslooking_trial :
It was likely that the court hearing was initiated not so much from a concern about Joseph being a money digger, as concern that Joseph was having an influence on Josiah Stowell. Josiah Stowell was one of the first believers in Joseph Smith. His nephew was probably very concerned about that and was anxious to disrupt their relationship if possible. He did not succeed. The court hearing failed in its purpose, and was only resurrected decades later to accuse Joseph Smith of different crimes to a different people and culture.
http://www.omninerd.com/articles/The_1826_Trial_of_Joseph_Smith_Jr :
Fawn Brodie’s biography of JS provides perhaps the most famous allegation concerning the 1826 event. She claimed, "On the basis of the testimony presented, including Joseph’s own admission of indulging in magic arts and organizing hunts for buried gold, the court ruled him guilty of disturbing the peace."4
http://www.lightplanet.com/response/1826Trial/1826Trial_Hill.html :
