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Did you keep a copy the craigslist ad? Print it out and any emails that you might have done between yourself and the person that sold you the phone.
Sounds like (to me) that this person had insurance on the phone, sells it to you and then reports it stolen to get a new one.
You should be able to show Verizon the email transactions and prove you did in fact purchase this phone. Otherwise, you are in procession of stolen property and not sure if you will be able to use this phone.
I could make sure and ask my Verizon Rep on Monday when I talk to him.
Wait about a year and then slash the tires on his car. Chances are he will have ripped off so many people in that year he won't have any idea who actually slashed his tires. He'll probably spend about $400+ on replacing the tires.
NOTE: I am in no way advocating retaliation or destruction of any property. I was only kidding.