Red flags EVERYWHERE!!!
Does SHE know it was your toy? Does SHE know it was sent to her (used) without consent of it's owner (You?)
His involvement is pretty clear. He stole, lied, hid, fringed on cheating...thats one set of issues.
Her scope of involvement isn't crystal clear (obviously she's doing things to egg him on) But if I was in your situation and found that the two of them conspired knowingly to have all this fun with YOUR toy, that HE stole, and they had a big laugh together, I'd be out.
If it was all him, i might still be out, but at least id feel as though it was a bit less malicious.
Either way, this treatment isn't ok, and it damn sure isn't Ethical... best of luck