iPhone 5 "disabled" need help!

Hey guys!

So here's the deal, I bought an iPhone 5 off of eBay for pretty cheap and now that I have it, I realize it's a stolen phone and I got scammed for $300 . Nevertheless I am now in possession of a 16 gb iphone 5 but the home screen doesn't let me even try to open the phone, it just says disabled. It allows me to make emergency calls but that's it. I know it is stolen because I tried doing that the where you put it in DFU mode and restore from iTunes but it stops half way through because "there is a passcode lock" and it cannot do the full reset without entering the password.

The thing is, I can't even get to the screen to enter the passcode because it only says disabled. So am I SOL here?? Is there anyway I can use this phone or am I just out $300??

Please let me know!!