Quote from: Garrett Burgwardt on May 11, 2011, 05:31:52 PM

The problem with paypal is that paypal will initiate a chargeback, and since bitcoins are irreversible, the thief ends up with both paypal USD and bitcoins.

But chargebacks must be legitimate. If a credit card user fraudulently pays for a meal using a stolen credit card, the credit card company does not go after the restaurant, it is the CREDIT CARD COMPANY that must bear the brunt of any fraud. It's this accountability for abuse of their own system which - as we all know - bankers and high finance are very well rewarded.

Paypal says:
"A chargeback happens when a buyer asks their credit card issuer to reverse a transaction that has already cleared. This can mean that a payment youve received in your PayPal account could be reversed, even if youve already posted the goods which can of course be frustrating.

PayPal will help you as much as possible if you wish to dispute a chargeback, but the final decision lies with the credit card company. However you can also get protection with PayPal's Seller Protection policy."

So if you get scammed YOU ARE ENTITLED TO BE REIMBURSED BY THE CREDIT CARD company who is doing the charging back IF YOU CAN DEMONSTRATE EVIDENCE that the perpetrator of the fraud made the payment under false pretenses and that the buyer received the goods paid for (like the thief buying dinner at the restaurant). Like the restaurant owner, you accepted their brand of payment on good faith, and the understanding that they would not be INSURED BY THE CREDIT CARD COMPANY against fraudulent transactions, you do NOT get a call from the credit card people demanding a refund for the money spent on the thief's dinner! - THAT'S WHAT THE CREDIT CARD FEES WE ALL PAY ARE FOR!

So my response to a chargeback fraud would be:
1) Report the crime to my local police and get an incident number.
2) Print out records from the bitcoin trading site (if you have one) or records for any wallet hosting website showing that assets were transferred to a thief posing as a buyer.

The credit card companies might try to wiggle out of compensating you, but will concede if you scream loudly enough.

The best solution obviously, though, is to avoid Paypal in the first place for these trades, and to understand it is HIGH RISK in this respect. But whatever you do, don't let the b*st*rds try to leave you holding the bag without putting up a fight.