Who is Liable with Defective Unit

Hope it all works out. Why when even buying used I look for a dealer. They are more sensitive no negative feedback, they have more at risk than an individual seller.

I would say the seller is liable. Even if it worked fine when packed and shipped out, it apparently did not arrive in working condition. That means something likely went wrong during the trip, which no doubt subjected the device to more physical stress than it normally gets while sitting on an audio rack.

If I was the seller, I would make it right one way or another. Any reasonable seller should do the same. That may look different depending on what route you take (repair, replace, etc) but it should be on the seller to take care of the buyer.

If you can't work it out with them, I would start a paypal dispute sooner than later. You only have so much time for that process. 

I had what sounds like a similar problem with a preamp I bought used. My technician found that the pcb for the remote had come loose during shipping and just needed to be put back in place. Cost $100 and seller covered it.

US Audiomart, apparently has no standard that is enforced...sales are "as is"; however, the ad indicated full functionality.  Pay Pal is the likely enforcer, I guess.  I've bought & sold a number of items on the internet, and this is the first problem I've had with a seller...I've had product issues before, but sellers are generally more than willing to get the issue resolved equitably.    

What site did you purchase it on? Different sites have different rules. I would imagine that you could also contact PayPal and tell them that the DAC was not as described and they will reverse the payment.