Gizmodo has an explanation on their web site as to how they acquired the lost or stolen iPhone prototype which states that " On the night of March 18, .. he (Apple Engineer - Gray Powell) abandoned it (the iPhone prototype) on bar stool, leaving to go home. " (he forgot his phone in the bar on the night of his 27th birthday celebration)

Allegedly, a patron of the bar (aka "the source") noticed the phone on a barstool and took it with him (or her).

Purportedly, the stolen iPhone was shopped to both Engadget and Gizmodo by "the source" and appeared in photographs on the Engadget blog post of Joshua Topolsky posted Apr 17th 2010 7:48PM. Gizmodo paid $5,000.00 for the actual iPhone 4G prototype which they photographed, dismantled and analyzed.

A detailed description and analysis of the iPhone prototype were posted on the Gizmodo web site by Jason Chen entitled "This is Apple's Next iPhone." (including video and commentary by Mr. Chen).

On Friday, April 23rd, sometime after 7:00PM, the police, with signed search warrant in hand, broke down Mr. Chen's front door (he was not home) and confiscated his computers, hard drives, business cards, an American Express statement and other items.

Yesterday, Gizmodo revealed that the police had searched Mr. Chen's home (last Friday) and provided a detailed account written by Mr. Chen.

Gaby Darbyshire, CEO of Gawker Media, (the parent company of Gizmodo) wrote a letter to the district attorney in defense of Mr. Chen, " under both state and federal law, a search warrant may not be validly issued to confiscate the property of a journalist. " Gabrielle is half right, if the journalist knowingly purchased a stolen iPhone, it is a felony. The protection does not apply. They are not asking him to reveal his sources. They don't have to, they already have his computer. He does not have to tell them who the source is, it's probably sitting right there in his email. He doesn't have to say anything. They've got his MacBook. He is in iJail.

The police could get the receipts for the bar where the iPhone was found and call on each of the patrons in attendance that night. (i.e. police work) Some sources say that the police investigation was requested by Mr. Powell. (not confirmed)

Stephen Wagstaffe, spokesman for the San Mateo County District Attorney's office, acknowledged Friday's raid. No charges have been filed yet, but a felony investigation is under way.