The Shulhan Aruch rules in the Hoshen Mishpat section (356:1) that it is forbidden to purchase merchandise that one either knows is stolen or has reason to suspect is stolen. One who purchases stolen merchandise effectively encourages the thief to continue his criminal practice of stealing and selling. If a thief knows that people are prepared to purchase the stolen goods, he will be encouraged to steal merchandise to sell it, and (among other reasons) Halacha therefore forbids purchasing items when there are grounds for suspicion. Examples of suspicious merchandise include items sold for an unreasonably low price, or items sold by a person who has a reputation for thievery.
In a situation where there was no reason to suspect that the merchandise was stolen, and one unknowingly purchased the merchandise, must he return it to the owner?
The Shulhan Aruch (356:2) rules that in such a case the buyer must return the merchandise to the owner, who must then pay the buyer the amount he had spent on the purchase. The owner may then bring a claim against the thief for the amount he had to pay the buyer. The basis of this Halacha is a concept called "Takanat Ha'shuk," the interest in ensuring that people feel at ease making purchases without concern that the merchandise may be stolen. The Sages enacted that buyers of stolen merchandise are reimbursed immediately by the owners, in order to allay fears among consumers. If buyers of stolen goods would be required to bring a claim against the seller to retrieve their money, people would be less inclined to buy, which would result in an undesirably sluggish market. The Rabbis therefore established that the owner pays the buyer and he may then bring a claim against the thief.
It must be emphasized that this applies only if the buyer had no reason whatsoever to suspect that the goods were stolen. Where he had reason for suspicion, then he must return the item to the owner and the buyer may then bring a claim against the thief to have his money returned.
There is one situation where the buyer is allowed to keep the merchandise he purchased, namely, if the purchase was made after the owner had despaired from ever retrieving the stolen item. If the owner had despaired and there was no reason for suspicion, then the buyer may keep the merchandise. The Rama (Rabbi Moshe Isserles, Poland, 1525-1572), ibid 7, however, in his glosses to the Shulhan Aruch, adds that this final provision is subject to the rule of "Dina De'malchuta Dina" – the law of the land. In societies where the law requires buyers of stolen merchandise to return it to the owners even if the owners had already despaired, then one must abide by that law. Only if there is no such legal provision in the society in question does Halacha allow the buyer to keep the merchandise, if the owner had despaired before the transaction and there was no reason for suspicion.
These Halachot emphasize the importance of carefully assessing the situation in every transaction to ensure that the merchandise had been obtained through lawful means. Halacha requires not only conducting oneself with honesty and integrity, but also dissociating oneself entirely from the world of theft and criminal behavior generally.
Summary: One may not purchase goods that he knows were stolen or has reason to suspect were stolen. If one purchased stolen goods regarding which there was no basis for suspicion, then he must return them to the owners who must pay him the amount he had spent on the merchandise and the owner may then bring a claim against the thief. If one purchased stolen goods when there were grounds for suspicion, then he must return them to the owner and the buyer may then bring a claim against the seller. If the owner had despaired from the item before it was sold, the buyer may keep the item, unless the law in that society requires returning stolen items in such a case.
See the book- "Pure Money" by Dayan Cohen, pages 197-198.
