This whole thing has been a combination soap opera and train wreck since the get-go.
Unfortunately for Gizmondo, the saga plays out in California, which is one of only 18 states with "found property" laws on the books. Had it happened in most other states, the story would have ended with Gizmondo returning the phone to Apple.
But California makes it a crime to keep, buy, or sell found property, which means that when Gizmondo bragged about buying the phone for $5,000, they were confessing to a crime...and the money in question was enough to nudge it into felony territory. Brag about committing a felony on a blog that gets a million hits an hour and, yeah, the cops might eventually notice...
Now, what Chen should
have done was pay the guy who found it $5,000 to let him take it apart and photograph it, without actually taking physical possession of the phone. Then Gizmondo would have been in the clear. It isn't a crime to talk about someone else finding property, or to take pictures of found property.