The story is burning all the Apple related pages. Although Apple officials say, their iPhone 4G prototype has been stolen, Gizmodo.com argues it has been lost by an Apple employee named Gray Powell. Powell is a developer at Apple and currently he works on Apple’s latest baseband.

It seems Powell has lost the device in the german restaurant Gourmet Haus Staudt in Redwood City, California, after having had too much of our wonderful german beer.

Anyway Gizmodo.com now got their hands on the device and show what it’s got. Sadly they cannot get past the “connect to iTunes” logo because the device has been deactivated over the air obviously using mobile me.

We feel like the iPhone Dev Team or GeoHot should get their hands on that device. Until further news enjoy Gizmodo’s vid:

Update: in the meantime Apple has filed a formal claim to get back their device.

Update 2: Conspiracy theorists say this is an Apple marketing thing as the story doesn’t pass the smell test.