I don't know about e-bay's rules but you could prosecute criminally. This would fall under fraud laws and theft by deception. If the package was shipped interstate it would now fall under federal commerce laws.

Paypal nicely acts like a big of an escrow. You have just as much right to dispute the situation as the buyer does. I would contact both eBay and Paypal immediately, explain the situation, and ask for some mitigation. It's just human nature that people tend to want to side with the one who is doing the most open communicating. It's going to be a bit of a he-said/she-said, but there is always inherent risk with buying or selling on eBay. You may unfortunately end up caulking this one up to the cost of doing business, but you can certainly warn other sellers about them.

I have a $450 item coming from eBay. Now I'm nervous! lol

Unfortunately as a seller on eBay, you are subject to issues such as this. Most likely you were a victim of a scammer. They have probably done this to other buyers as well. The first step to dealing with buyers like this is to communicate with them, and explain the situation. If they are in fact honest, they may be willing to accept a partial refund which will lessen your loss. If they are unwillingly to accept a compromise, you have to decide if the cost of the item is worth getting negative feedback.

As an former eBay seller, I had several instances where to protect my reputation, I either gave a full refund or replacement. PayPal and eBay hold the seller as responsible from listing to the delivery of the item, even though you can not control a buyers honesty or delivery safety.

If you continue the dispute, and the buyer has returned the item, the only thing you can do is provide PayPal with all of the relevant information you have, proof of delivery, photos from the original listing condition, photos of the item once you received it from the buyer, and any other information that may be able to show that you sent the item in one condition, and received it in another.

You'll want to state a professional overview of the transaction in the feedback you leave, to make other sellers aware of the issue that you had. Remember to state facts, to avoid appearing as a disgruntled seller.

I hope that the dispute ends in your favor, but I wouldn't place too much hope in that.....it's not a seller's market anymore. One reason I stopped selling on eBay. If you are left negative or incorrect feedback, make sure you place a response to it, to show other buyers your side.

Good luck!

I don't sell on eBay, but I do have a friend who is a power seller. She lost $400 on just such a dispute once over a laptop computer. She always takes a full screen shot of her ad. She takes a video of the condition of the item before packing, of her packing it, up to including shots of it being labeled and seals, puts a special mark on the box for identification, then takes a shot of it being mailed. When she receives the item back, she does it in reverse, has shots of herself receiving the package, opening the package, and finding what was (or in her case wasn't) inside. She has no problem with bad feedback, because she has 99% wonderful feedback, and most buyers know there are some bad buyers out there who will give bad feedback for spite.

I know this won't help you in this situation, but at least have pictures ready for your dispute. If you posted a picture with the ad, eBay should have a record of the original ad.