Advice on Art Theft...?

[mandyseley.livejournal.com]

Someone on DeviantArt just contacted me to let me know that my art had been "stolen." I've never had this happen before, and it's not quite the normal "posting my work and calling it their own" situation...

The person who contacted me was an artist who was commissioned to draw someone's character. Their customer gave them a reference image, which they thought looked familiar. As it turns out, it's a recolored version of a commission I drew a while back.

The original is here, and the recolor that this person showed me had the cat character painted over with black and purple, and my signature crudely scratched out (the person who contacted me has removed the recolor from their photobucket account now, though their customer is still using a cropped version of it as their avatar on this FA account)

The customer claimed they first found my original drawing here, on some site called e621 - a site I've never heard of...

I'm at a bit of a loss, here. They're not publicly posting the recolor as theirs (other than the FA avatar), but they are distributing it via email and were careful to remove my signature and avoid crediting me (or the character's owner).

So... what should I do, here? Is this enough cause for concern that I should approach this guy about stealing my work? Should I just let it slide because this is the internet and stuff like this is bound to happen?

Looks like I'll be watermarking work from here on, though. Sigh, I hate watermarks.

Update: The avatar was removed by FA admins, and the reposted image was removed from e621 once I asked the admin to take it down.