I agree, you should not give them $850 just to get them off your back. But there are some fishy aspects to this, like the messed up address. I would first demand from them a complete statement for this card (if they haven't "sent" you one already), that includes all the transactions ever put on it by you or them. If I were you I would want detailed documentation before conceding anything to these folks.

My condolences. :-( This is a big f***ing mess that will take a long while to clean up.