Exactly, Will, but whether or not the original story is true it raises doubts whether Paypal's procedures are capable of distinguishing between something like this and a dodgy watch, handbag or pirated software.

Given that their disputes procedure seems to be semi-automated, and even where humans are involved they are in a remote call-centre and probably instructed to do things by the book, it seems very likely to me that this particular scenario could very easily arise, even if this story turns out to be a hoax.