My cousin traded vehicles with some one off craigslist a year later he was pulled over and the police took his vehicle because the engine was stolen. The police report said that the engine was stolen in jan. 2005 and the owner has been paid by the insurance. Is my cousin entitled to crarges and or can he still keep the engine after he had put over $6,000 into having it rebuilt

Did he get arrested? Being in possession of stolen property is as bad as actually stealing in most cases. If he can prove he bought the car with a clear title and engine numbers matched he will not likely be convicted of theft and equally not likely of keeping the engine.