Yes, it seems to be a memory issue and probably a result of hacked memory.
They should definitely replace the player for you since you've only just bought it! You should definitely complain to the shop about it and get a replacement. There should be laws against this, esp WARRANTY. When you get the replacement, get them to load a whole lot songs on there and test it. If you can't get a replacement, you can try some other things, but I thnk rather than spend too much time on it and possibly 'breaking' the player, try to get a replacement from the shop for it.
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