Gizmodo In Legal Trouble Over iPhone 4G Phone?

Silicon Valley police are investigating allegations of theft after reports that a prototype of Apple's iPhone 4G which had been found in a bar was sold to popular tech site Gizmodo for thousands of dollars.

The New York Times reports that the chief deputy district attorney of San Mateo County in California could potentially decide to prosecute on the grounds that Gizmodo had purchased stolen goods.

The prototype, which had been a carefully guarded secret of the Cupertino-based company, was being stored in a iPhone 3G box.

It was reportedly left behind at a bar in Redwood City during field testing. Gizmodo caused a storm of controversy by outing Apple employee Gray Powell as the man responsible.

The iPhone 4G eventually resurfaced on Gizmodo, which posted a detailed account of the device, along with the software and hardware components.

According to the report, the unidentified person who found the coveted device repeatedly tried to contact Apple before turning to the web site.

Gizmodo was reported to have paid $5,000 to the finder when he turned to them after failing to get a response from the iPad maker.

The investigation into the iPhone's disappearance is being headed by the computer crime task force of the Santa Clara county District Attorney. Apple has not yet decided to file charges.