IPhone 4 No signal - Barred?

My Boyfriend has bought an iPhone 4 from a friend of a friend,
Problem is when we put a sim card in it shows O2 3G but no signal at all!

Was told it might now be IMEI Blocked!
Does this mean we can't use it on O2 or any network at all?

Anything we can do?

It may not be barred. Does the SIM work ok in another phone?

Perform a hard reboot on an iPhone by holding down the home button and the top 'lock' button at the same time for about 20 seconds until you see an Apple logo on the screen, then release the buttons.
This reboots the phones software without deleting any data or settings and helps to clear any temporary software glitches. This may help the problem.

If not, then the phone may be barred. O2 could tell you if you called them with the IMEI.

A barred phone is when a phone is reported as lost or stolen to a network and its IMEI (serial) number is blocked. This makes the phone unusable across all networks with any SIM card. The only way to unbar a phone is for the original owner who originally asked it to be barred to contact the network asking for it to be reactivated - this would happen if the phone was lost and then found again for example.
Unless the original owner of the phone asks for it to be unbarred, it can't be unbarred. It is permanently barred across all networks with all SIMs.