IPhone 5 bought off e-bay in December/January, it has now been reported lost/stolen?

My boyfriend bought an iPhone 5 off E-bay in December/January 2012.In the last few days he couldn't make or receive calls or texts. He spoke to Orange and they said it had been reported lost/stolen and was now black listed. Obviously E-bay will do nothing as it is out of their 45 day policy, and Orange are now going through some fraud procedures… But is there anything else that can be done? Have read so many stories of this happening now, there must be a way to get some form of compensation, or at least the money back from the purchase. He has insurance from a separate company with the phone, will they be able to do anything about it?

Are you 100% certain it is reported lost/stolen, or is it that it's a contract phone which the contract is not now being paid on?

lost/stolen would be easy, as you can reasonably 'prove' ownership of the handset by virtue of insuring it.