Can an iPhone 5 be blocked if factory restored?

I recently found an iPhone 5 which had no passcode protecting it. After asking around the bar if anyone had lost a phone and leaving my number with the barman I did what anyone would do in this situation and decided to keep it. I have now removed the sim and factory reset the device and am looking to sell it to a friend but don't want to sell it to them if it's just gonna get blocked. I guess the question is - Is there any way the owner can block the device even though the sim has been removed and factory reset? I live in the uk and the phone is on Vodafone btw

I believe the device can be blocked from accessing iTunes online if the owner reports the serial number to Apple. It will still work as a phone. If you sell it, make sure you specify caveat emptor: let the buyer beware. Some don't care and will buy the phone. Cheers.

Leaving aside the issue of whether you should keep a "stolen" item (theft by finding is the offence in question) yes it can be blocked via its IMEI number, which is hard written into the phone, and can't be removed, no matter how much you format/wipe/reset the phone, or change the sim, etc.