Eh, you should probably contact a trusthworthy lawyer and talk that through.
I mean why would they ask $500 for a $5 item. If you took it and stole it you did commite a crime but it is not totally on them to punish you.
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Also sueing you will cost them more than $5 of the initial item..the $500 statement almost feels like a blackmail. Don´t act before contacting a lawyer!