Take a deep breath and say:
"I'm sorry you have experienced problems with the phone, I did believe it was in full working order.
I appreciate you have spent additional money, but had you alerted me to the problems I would have instantly offered you a full refund on return of the phone. If you would like to send it back, please let me know."
or to words to that affect.
Better to get the phone back, than lose the money and the phone. Hopefully if he's just trying a fast one, he'll go away.... Just remember always be polite as Ebay/Paypal may read all correspondence.
Good luck with it.
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