A similar situation happened recently with Pat Diveney. Gus Briseno in Arizona was seen on a stream playing with a cue that had been stolen from Pat. Upon the knowledge of possessing the stolen cue, he returned it to Pat.
He didn't say, "I payed $1200 for this cue so I need that much to return it." He simply returned the cue because it was the only right thing to do.
I don't understand how anyone can construe this any other way. Upon knowledge that you have stolen property, you give it back. Sometimes you get a reward, sometimes you don't. Do you think when pawn shops are found with stolen property they require money to give it back? Sometimes, taking a loss is the price of doing business. If you are going to associate with people who will harbor stolen property, sometimes you are going to get burned.
The fact that they were offered a $500 reward makes them look even worse.
Like Barton said, no gray area. Either you return it and take the loss or you strong arm somebody and learn a lesson about the chain of custody in regards to stolen property.