Your situation Sucks bad. I know I have been there before about 3 or so years ago. Got jacked over for about $2800.00 , My advise to you is get what you can as far as $$ from these guys and count the rest as a Loss and a Paid for education into this game.
If you don't and let this guy build you an engine it could very well cost you and those around you their lives if it comes apart at speed after he gets the engine back to you. If it comes apart at 80MPH in the same situation but with you on the gas. You could for sure loose control of the car from all the fluid and shrapnel getting on your tires......... Get what you can and RUN as fast as you can away from these clowns!