This phone and case could fall in some serious penal codes depending on the state. (Do your research depending on the state he is on. California and Texas have one of the most extensive and effective penal codes, try to check FBI's NCIC to be sure as well) It can fall under a theft penal code as he is selling you a phone (property) that you are not able to fully enjoy. You have a phone that you are not even able to put under your name, he was not supposed to sell it as I am sure that person used the Verizon EDGE program. This is theft even though he is not physically stealing the device from your hands. If he is not able to contact the person he bought it from, then this is stolen and therefore, penal codes can be applied and the seller can get in serious trouble. Its either that person gets that phone off the contract and out of the account or this is a fraudulent transaction, thief and stolen phone.
Oh, and forget about the legal problems he might get involved, you could get in trouble as well by not having a phone under your name. Return that iPhone ASAP.