I can understand why the players are upset. But in this case I think they are upset as much at themselves as you, because frankly it was inattentiveness on their part that cost them. When folks make a mistake and it is their fault, I find this is when people get really upset.
IMHO, I don't think you did anything wrong. Players who want to not pay attention when dealing with awesome loot drops get what they deserve in my opinion. And awesome loot brings with it people wanting to get that loot away from them, in this case in the form a cagey blacksmith who knows how to look out for his own interests. He is not evil or even underhanded here. He just used the situation to his advantage to make a deal that was in his best interest, as I would expect of an NPC living in hard times. I would think it would be on the players to know what they are dealing with and take their hard earned loot seriously.
Is it a bit hard nosed? Meh, not really if you ask me.
As far as the player who is distracted by his phone, I would find out if it's bothering anyone else at the gaming table and if so politely ask him to refrain from using it while you are gaming. Simple courtesy. If that doesn't happen then they could at least extend the courtesy of not biting your head off if their distraction causes them to get screwed in some way. Part of the game is NPC interactions and I think you making the blacksmith take them to task is a solid bit of DM'ing on your part and should be encouraged, not discouraged. You didn't punish them, you gave them a social encounter. Which they failed. But it might lead to another social encounter. Sure they could steal it back, but that raises questions if they are a good/neutral group and may even cause more social issues if they get caught and are now wanted criminals. But they might also get to know the blacksmith better and find out if he values something other than gold that they can trade for. Perhaps his neice was captured by orcs and needs rescuing. Or some other leverage that will create some gaming goodness.
I get why they are upset, they got hosed. But they got prevent-ably hosed. The fact they could have prevented it and didn't is what's really upsetting them. Everyone just needs to take a deep breath and think it through a bit.