I understand where you are coming from, but from the buyer's perspective, they received a fairly expensive phone that only worked for a few days. They may well have told you it worked perfectly. They aren't disputing that it worked on arrival. They aren't disputing it was working when you sent it.
All they are saying is it worked fine but broke down after a few days.
When you say you inspected it and found it damaged, what do you mean exactly? I am taking it you mean it wasn't working properly. But do you mean there were visible signs of damage on the outside? scuffs, cracks, that sort of thing? I am not getting that impression.
Therefore, we're probably talking about only operational problems, possibly from a knock, but that is uncertain.
I don't see that ebay had much choice but to refund the buyer. You can also understand that a buyer is unlikely to negotiate a partial refund only for an item that is going to cost $500 to repair. Not if they can get a full refund.
If they did drop it and did the damage themselves, yes, it is a bit shady but you have no way to prove it.
My only advice would be that ebay is a risky platform for selling these types of items. You might do better on other sales sites. I know ebay probably gets more views and the likelihood of a better price but you have to balance that against the fact if you sell elsewhere & someone comes and examines an iphone and picks it up, then they can't really come back at you for a refund down the track or if they do, you're in control as to how you sort it out. On ebay, you're not.
I don't think you'll be able to do a thing to resolve this. The buyer says the phone developed faults. The phone has been returned and is indeed faulty. You have no positive proof as to how it became faulty. In a case like this, ebay would normally protect the buyer.
