My friend just learned this the hard way. The week the BC bubble burst...he was selling coins for nearly 25% more than Gox weighted average price. I was baffled that this was happening and told him it sounds too good to be true. But they buyers kept buying and the dollar signs took over the rationale portion of his mind. They were even contacting him outside of the But It Now auctions he had listed asking for more. It was then he started realizing the poorly written English and stopped it all.
By the end of last week...I think he lost a total of $1k+ after PayPal stated that all transactions were not made by the actually account owner...bc the accounts had been hacked. PayPal had then provided an example of one of the accounts' login history...in a 48 hour period, the account had logged in multiple times from somewhere in Mumbai when the account owner actually lived in Salt Lake City, UT.
HaHa, That is my exact story from this week. except i live on the east coast and it was about $1.300. Ebay wouldn't even flag the accounts after paypal reversed the transaction for a unauthorized transactions.
The safest way to buy/sell coins with paypal is to NOT do it..