I can't believe that this works at all. I imagine that between an established seller and a brand new buyer, Amazon would be on the side of the seller. In the cases where the buyer wins, who pays the cost of the device (the seller or Amazon)?
It's difficult to have a policy or heuristic here. If you side with "trusted" sellers, then it all hinges on what your definition of "trusted" is. Scammers will behave themselves until they are considered to be trustworthy, and then start to cash out by shipping clay iPhones.
This would allow sellers to carry out selective scamming: send buyers with longstanding accounts genuine iPhones, send new buyers boxes with clay and pocket the cash. Not so common on mainstream sites because it's hard to get away with currently, but apparently used to be rife on darknet marketplaces.
Do sellers know the buyers history with Amazon?
No. If you have a database of old buyers you can see who's bought from you in the past, but otherwise you only have a name and address.