I have encountered this a few times but not quite like this. I sometimes trade with some lower level players, help them SOME. They ask me to show me what i have. I will list it, but they insist on me putting it on display. I did once, but they seem to get irate when I only list them. I think there is some kind of item duplication happening with the trade system.
This time it is a level 7 offering me a dino sword. They said that he found it, that some noob dropped it. It is little hard to believe. Any thoughts?