Go to Settings --> Privacy --> Factory data reset --> Reset phone --> Erase everything. It will do its thing.
To factory reset your phone and wipe all user data in Recovery, power off the phone. Hold the Volume Up, Volume Down, Home and Power buttons all at the same time until the phone vibrates. You will be in recovery Mode.
Use the Volume buttons to navigate down to "Wipe Data". Use the Home (or Power, not sure which) Button to select and verify. The phone will reset and reboot to "select language" and is ready to be setup again.
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