Read 14 pages of the thread. It does have its entertainment value.
I agree with what some members stated, that "Sane Sam" is likely Loco Louie himself. Often, the person who initiates an action is the one hoping to benefit from it, and given the circumstances, it is highly unlikely that any rational business partner will surface at this time to just to "put things right" with a single person without a plan to address the big picture. I surmise that there is no business partner in fact. Most modders I know in the hobby are OMO and why should LL be any different?
The $500 "double or nothing" wager likely turned out to be closer to nothing. The OP likely received a stock watch, or one which was modded with the bezel insert. It is a moot point whether he is better off having paid $500 for nothing, or $1000 for a watch which could be worth $400-500? In the first instance, his loss would have been $500. For the second, depending on the watch, his loss could have been $500-700.
No business partner will surface to right a singular wrong if he is sincere. He will address the community properly and make restitution where it counts. To everyone. An isolated offer (or perhaps the same offer was made to several members I won't know) speaks of a scam, and I maintain that LL has no business partner. He is in a set up where he can be waiter, chef and cashier.
I hope that OP got what he wanted, and wish him the best.