Sounds more and more fishy to me. First it was grinded off, then painted. You got the bike for free from a shop? Shop's don't just give stuff away like that. They will keep the bike around so if they need to persue legal action against the owner to recover the bill they can. What if the original owner runs into you on it somewhere and beats the shit out of you for being on his/her bike? What if someone stole the bike from the original owner, took it to the shop to get work done, got scared and left it there? In any case it sounds too good to be true. If you run into a cop with no bill of sale and no title, they don't care what the story is, they will confiscate the bike. That's how it is around here anyway. If you go to get an ORV sticker to ride somewhere they run the VIN numbers, and if it is stolen they come after YOU for having it. It doesn't matter if you stole it or not, but if you are in possesion of stolen property you take the fall for the theft.
Go down to your DMV and register the bike / check to be sure it's not stolen. Save yourself the headache.