Hi. I have a similar problem with my K2. I've never let it fell, it has never bumped into anything and it's always inside a leather case. Some days ago I was reading at night when I finished I just put down the device. Next morning the screen showed distorted text and strange lines like those of the OP. It seems that the device is still operating, as I managed to restarted - I see some flashes, but no images or text - and I can see some white lines when I try to move around the menus - though I don't see them.
http://imageshack.us/photo/my-images/685/img0694ml.jpg/
I contacted with Amazon today, let's see what their response is.