I am a middle man and the guy gave me more than the $500 limit.

[DerekBaller]

I am a middle man and the guy gave me more than the $500 limit and now my account is limited and I can't refund the amount back to him. 

[Quandary]

At this point it's best that speak with customer support to see what can be done to resolve your problem.

[DPCreations]

Being the middle man in a series of transactions likely was flagged by PayPal a suspious.

Why didn't the sender send the money directly to the recipient rather than pass through you?  You accepted being part of something that is not permitted by PayPal.