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Here's a good PayPal comment on the forum:
This also happened to me. I sold something on ebay, the buyer had low feedback but the money was there in my account so I sent the Cd key for the game. Now PayPal have sided with the scammer and I now know (too late) that seller protection is a joke. They also hit me with a $15 chargeback fee!
PayPal have got too big and now they do not offer the seller protection they promise. Going to look at regulatory bodies to see if they need to stop advertising their seller protection.
Sorry to hear you're having issues, but it's actually pretty clear in PayPal's Seller Protection details that digital goods are not covered. So you sold something that isn't covered to a buyer that did not have much positive history. I would chalk it up to a learning experience. You would have the same issue with any other payment processor, too.
I am a victim of PayPal's false advertising of seller protection.
I shipped products signature confirmation, provided proof buyer changing accusation/story 3 times, proof of receipt of the products when I purchased them from reputable dealers and even video footage of packing and shipping that was filmed due to the price level of this transaction as a precautionary measure. All details of proof match the pictures in listing and description provided in listing. Serial #'s and all. In the end, it doesn't even matter. The buyer threaten to get the FBI two week ago(sent that screen shot to paypal). I am still waiting.... All that is left is civil suit. For me to spend even more money.
In the end no form of evidence/proof matters. SELLERS BEWARE! I lost $5,720 thanks to PayPal false advertisement. Buyer has the money now (instant reversal) and my property.
True colors has shine through.