My Son's 19 Year Old Cousin Gave Him A Knife, What Do I Do?

You did a good thing, i suggest you keep the knife away from him. He's only 12 years old and could get in a lot of trouble with it. If you give it back he might go around saying, "i have a knife." and it'll get around until the teachers hear it and it'll get taken away with consequences. It was a bad idea for John to do that, because now your son will think its okay to use it on someone that "messes with him". Again i suggest, keep the knife.