They can sell it. They'll strip the characters of the gear, sell it, and then auction the characters off. I'm in the process of reporting it, and should be able to get everything back but it's still crap.
Actually, it worked out great. I was able to get my account back, though almost all of my stuff had been sold. Blizzard was able to restore all that and whoever hacked it had left ingame items in my main character's bag, that I assume they intended to sell, that I was able to sell for 2000 gold in game.
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Any new updates on what happened so far? I hope you got it back and set things straight with that person.
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Essentially, I profited :)
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