If you got a good price and can live with the dent, I'd chalk it up to a learning experience and forget about it. If you do enough deals on the auction site, eventually you'll have one that doesn't go perfectly.

As for the other options, if you truly cannot live with the imperfection, accept his offer and return it and leave positive feedback for his willingness to make it right. The idea of 'turning him in' to the auction site is probably a waste of time. In this instance fraud would be challenging to prove, I think. And at the end of the day, the auction site does a poor job of forcing people to behave in a certain way.

Hey, we cannot force people to do unto others as we would, and trying to is just futile. I appreciate how frustrated you must be, but I would look for the path that caused me the least aggravation while providing an acceptable outcome.

YMMV
Neal