So I bought one off of Craigslist yesterday that wasn't activated at all. So went through the process on iTunes to enter my number, zip code, social security, and billing password and got it to the screen where it looked like it was functioning. Then I called *228 to activate it and told me to enter a my number, so I did and it ends up that Verizon can't activate it since it has a bad ESN. The seller won't issue a refund.
What can I do with the iPhone?
not much. i'm not real familiar with bad ESN's, but i believe whoever had it on their account would have to make that account current before the ESN would be clean. i "think" your only recourse is with the person you bought it from.
Short of taking the seller to small claims court or trying to get them to straighten up whatever issue they need to on their end you don't have any options. It doesn't sound like they are willing to do anything since you say they won't give a refund and they didn't offer on their own to fix the issue. I've never dealt with Craigslist but I assume you paid with cash or check. If you paid by check and they haven't cashed it yet you can do a stop payment and let them know that either they issue a refund so you can return the phone or fix the issue on their end so they can get their money. Otherwise...you're stuck with a phone that can't be used...and if you try reselling it then you will be screwing someone else over...unless they know to check the ESN first.