I was wondering about this, thinking "stolen" or perhaps with outstanding fees not paid, etc.
But after reading around about it, it turns out that some "bad esn" devices could have been sitting around for a while and not dealt with by the legitimate owner, or from a pre-paid company, etc.
This is a Sprint device, which does not have pre-paid option, so that's unlikely.
I'm not sure what you mean by "sitting around for a while". On Sprint, phones sitting around will not get a "bad ESN" marker.
There are however a few scenarios why a phone will have bad ESN:
1. stolen, or lost by previous owner - obvious.
2. reported lost by current owner, phone replaced by Asurion insurance. Owner then finds the phone later, and instead of shipping it back to Asurion like ethics would dictate, he/she decides to sell it to pocket the cash.
3. owner's account is past due or in bad standings with Sprint, and the line is deactivated and phone is marked as "bad ESN".
4. Fraud of any type on Sprint
There might be some more rare cases of bad ESNs, but these are the main reasons why a Sprint ESN would be marked as bad. As a Sprint customer I steer clear of bad ESN phones. However, those on Cricket or MetroPCS often buy bad ESN Sprint phones and flash them for use on those networks.