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I can explain that one.
Say this was actually 1.9 million dollars. You sell something to someone, they give you the cash, you give them the item, and part ways.
Now immediately after doing so, someone swoops in, busts you for receipt of stolen goods (the cash) and says that it needs to be confiscated immediately. Are you thinking more of the person you just did business with, the item you sold, or the fact that you just had 1.9 million dollars yanked from you for a crime you could have very little knowledge of commiting.
I know I would first be concerned about getting the money back, as I had no logical way of knowing it was stolen. That is what we see here. As an afterthought, or part of the calming process, one might think to getting the trade item back instead.
If I was pulled into the police station (which he was, pulled into GM Jail) and the officer on duty tells me that the money I was paid is stolen from the bank down the street (let say), they caught the person who bought my item and he is the one who rob the bank. Guess what I would do? I would give back the money and I would want my item back. Simple as that.
He know the money is stolen, the GM told him/her. He knows the GM have scanned the logs. He knows he been cheated by his *friend* not the GM. So there is no doe-eye innocence.
Either way, in this country it is at your peril to buy stolen goods or accept stolen money. The only difference is if you didn't know ahead of time, you might not be put on charges. If you knew something is "hot" and you still bought it? It is illegal. I personally don't see anything wrong with what the GM did - if the picture is real. What I don't agree is that the GM didn't return his item.
Also there is no telling he isn't working with his friend. "Here I'll trade you a Stack of Rock Salt for 1.9 million gil... hurry up and use it up, so we won't be caught."