iPhone blocked network problem
This message has nothing to do with the iOS version of your phone, The message : This handset has been blocked on this network means that the handset has been reported as lost or stolen, probably by the previous owner. You need to contact the seller and ask him if the phone he sold to you was not stolen or found. 

If you have access to your IMEI (that you can find in Settings --> General --> Information) use this website to check the status of your handset http://www.amta.org.au/pages/amta/Check.the.Status.of.your.Handset