The Stolen Mustang

So one of the garages buys a Mustang at the auction and it turns out the vin numbers have been cut off another car and welded on to the frame they bought The junk yard tells them they're out of luck and they have to turn it over to the police and they lose their bid money. Does anyone know what the law really is? I can't imagine the junk yard auctioneer wouldn't be the one who loses the money not the buyer?