Similar case happened with me. I closed my shop on etsy as etsy charges high amount and doesn't provide proof of Delievery for digital item. When a scamming fraud buyer downloaded the digital product and claimed item not received, then email from etsy that download link sent to buyer isn't enough for PAYPAL for "Valid proof of Delievery". When it's clearly mentioned in the etsy listing that digital items are non refundable. Paypal is scamming Seller and favouring scamming BUYERS.. I will stop using Paypal. PERIOD
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