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"The purchaser then disputed the charge with his bank and PayPal again deducted the funds from my account. How is this possible?"
Yes, that is possible if the buyer won't take no for answer. They can invoke their bank reversal/chargeback rights to dispute you if they lost the PayPal dispute as those terms may be broader than PayPal Buyer Protection terms. Perhaps the item got stolen off their premises, if its not a situation where the buyer claims you shipped to a nearby street address to scam the them, which does happen quite a bit (if reports in the forums are any indication). It's a lot of money for the buyer too.
When PayPal gets wind of it, they open a chargeback case on your account and deducts the funds again and these things take longer than your usual PayPal dispute, about 75 days or more. The financial institution makes the ruling, not PayPal this time. Its a different can of worms. The reason the buyer chooses for the claim with their financial institution has an impact on whether you are covered or not by seller protection. Just have to wait and see.
Read, read, read:
If you want to seek damages, do it to the buyer direct. Take em to small claims court. Consult a lawyer.