Where I got lost though is the selling of an extremely valuable asset such as shop.com (a four-letter, dictionary, brandable, .com domain) at well under value. The first lesson in fraud detection is that if it seems to good to be true it probably is. A domain that probably has a value at close to a $1M going for under $1000 would fit the definition of too good to be true. Yeah, partners break up and can do some angry things, but selling an asset at such a heavily discounted price would certainly be shocking to me. A little more due diligence on buyer side would have prevented this. Otherwise I have a 100 foot yacht and an ocean front property in Nevada for sale for $1000 if you are interested. :) I mean even PayPal warns flat out warns about these types of transactions (https://www.paypal.com/eBay/cgi-bin/webscr?cmd=p/gen/fraud-t...)
To me this entire story is like saying I went to Walmart and parked my car. They have security cameras in the parking lot and I asked an employee if those cameras were monitored. The employee told me yes so I left the windows down in my car with my laptop and a wallet full of cash on the seat. I was only going in the store for a minute and I felt assured that if anyone stole them I could easily identify them and get my stuff back. When I came out everything was gone. When I asked the security guard to review the footage I could not see who the people were and could not identify them. I am now going to complain about Walmart's security practices because of this incident.
The good news for the OP is that at least he has ads on his site and I am sure the traffic he is getting from this post he may make back a few of those lost dollars in ad revenue :)