Count me in the camp that says he should return the device to Amazon. It sucks that he got stuck with stolen property but that does not change the fact that the right thing to do is to return the stolen property.
If he returns it to Amazon, I would suggest that he lets Amazon know who he bought the Kindle from. It is always possible that the owner reported it stolen, got a new one, and sold the old one online to make some extra cash.
And this is why I wouldn't buy anything like a Kindle through Craigslist. There have been reports of people who have bought Kindles through Craigslist, registered them before paying for them, and then had them blacklisted
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