Well, no offense intended to anyone, but my first reaction was that this hotmail account probably wasn't actually his, but he knew we wouldn't help hack someones account so he lied and said it was his.
Though, he seems to have put his case forward quite well, so it probably actually is his account.
Personally, contacting Hotmail probably won't do any good, because do you have any actual proof that it was yours?
As for losing all your contacts, I had a similar thing with my cell phone. It died and I lost all my friends numbers from my old school. You could always just try to find them on facebook, everyone seems to have it these days.
He alone, who owns the youth, gains the future.