Got a brand new iphone 4, stuck on activation screen

when i plug into itunes it says wrong sim card inserted however the phone is sim free.

i got the phone off of ebay, the guy was a trusted seller 100% feedback and sold loads of them with no complaints. he said if i go to the apple store because its brand new they would replace it but i am not sure they will. is there any other way to prove that its sim free or on a fixed network?
thanks

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