Why don't you grow up and refund his money in full?
This is a no-brainer, even you should be able to figure it out.
He bought subs, sent you money, you have his money.
You sent subs, uninsured, you have his money.
He receives broken subs, useless, you have his money,
He sends useless garbage back, your friend tries to profit off of it, you have his money.
He has nothing from this transaction, you have his money.
You really can't figure out that what you are doing is wrong?
Can you not afford a simple $160 to pay him back?
Just do what's right man, its simple.