Taking the hardass way from the get go will get you either a cap in the skull or worse.

You sound as if you have already made up your mind so just go to the cops and be done with it.

If you sue 'em they won't show up and getting a judgement paid from an all cash business is tough (leased shop, no real assets, no bank accounts, etc).

Of course it could all be just a simple case of an error on their part, compounded by your anger.