The items weren't lost, they were stolen - an in conversations with sister, nephew and other family members, the term stolen should be used. I have a friend who has a 19 year old son who is nothing but trouble - at first they tried to just let things slide, but more recently the dad has been using terms like "thief", "stolen", "liar" etc. and it seems to have an effect. The son gets pissed, but the dad just says "facts are facts".
Replace them so your son doesn't suffer, but nephew should not be allowed in the house period, until he pays for the stolen items. If he is allowed in, he will steal something else.
Also don't shield DS from this - let him know what happened. Let him see now what can happen to a teen who goes down the wrong path. If you gloss over it and make it seem like nothing bad happened, you aren't letting DS learn a valuable lesson from this.