Blacklisted(?) iPhone 7 activation
Bought an iPhone 7, 32gb, model A1778 off Craigslist, turns out it had been stolen from an Apple store. Found this out when I took it in to an apple store for service because I couldn't activate the phone. Screen said Hello in a bunch of languages, I'd choose the language and region, I'd connect to wifi or iTunes and a few seconds later, bam, it would just give me a vague screen saying that my iPhone had "a problem," couldn't activate, and that I needed to talk to the carrier or Apple Care. No details beyond that, no way to use it as an iPod touch even as far as I can tell. All I could do is hit start over, same thing happened.
After finding out what it was, the store said I could keep it and use it after I offered to give it to them (since it was theirs to begin with), so I guess it's mine legally now. Problem is, they didn't remove the block on activation so I can't use it for anything more than an expensive paperweight. I think the genius didn't have the authority to take it off their blacklist or something.
The carrier has nothing to do with the block/blacklisting, since it was a display model and never was associated with a network (plus I checked the imei), so the block has to be from Apple.
Is there any way to have Apple unblock the iPhone so I can activate it? Carrier doesn't have anything against it so in theory it'd work as a normal phone after Apple stopped prohibiting me from activating it.
Any advice would be very appreciated.