Bought a car where there is fraud in the chain of sale

[Jim on the hill]

Hi all,

Hoping for some input from the legal/insurance experts here.

I bought my dream car for £35k back in October from a well-known independent dealer it wasn't cheaper than the market so no alarm bells. Paid £500 deposit on CC, balance via bank transfer. HPI was clear at the time.

Fast forward to yesterday: The police have contacted me. It turns out the car was originally obtained via credit card fraud prior to the dealer acquiring it. The "True Owner" (presumably an insurer or the original victim) is now asserting interest. The police aren't seizing it but have confirmed the title is "clouded."

I’ve already drafted a formal rejection under S.17 CRA 2015 (Right to Supply). However, I actually love the car and want to keep it.

In an ideal situation I'd like the dealer to refund the £35k (Breach of contract/Nemo Dat).

Use that cash to negotiate a "title buy-out" directly with the original owner/insurer to "perfect the title."

Get the markers cleared and keep the car.

Questions for the PH Collective:

Has anyone successfully "bought the title" from an insurer in a fraud case like this?

Am I right in thinking I have a possessory lien over the car until the dealer refunds me? (i.e., I don't give the car back to the dealer until the £35k is in my account).

Is there any risk that the insurer can bypass me and seize the car from my driveway while I’m waiting for the dealer to pay up?

Any advice on the mechanics of "perfecting title" would be massively appreciated.

Use of AI above as it's explained a lot better than I could and I'm shattered after a very stressful couple of days of talking to the police and research.