Bought a blacklisted T Mobile Iphone 5 on Craigslist, how to get my money back?

I payed the guy $500 for a brand new iphone 5, the next day I went to activate it and I was told that it was blacklisted so I went back to the seller and hes 25 miles away and he said ok let me check in the system if this is my phone and comes back saying this is not his phone then after arguing he gave me a different phone that is currently working right now but i'm sure that it will be blacklisted. What can I do to get my money back and can I get the police involved also what can I tell the guy to make give me my money back

You were sold stolen property.
OF COURSE you get the police involved. God only knows how many other stolen phones this guy has.