... hate to say it, but things sounded better when he wasn't responding at all. This story blows, and even if he wasn't trying to rip you off the chances of him coming up with $850 to pay you back espeacially with the reputation you painted him as having... I wouldn't hold my breath on getting the money back. Do you have any other bread you can use to try and make money? I'd do what I can to start making money now to pay back your grandma.
Don't get me wrong I hope he gets the money back to you, but I think he's just trying to buy time and letting you 'cool off' before you realize you've been had. Either ride his ass about getting the money back NOW or start planning revenge.
... I hope I'm wrong. Best of luck.