Chargeback your credit card and they'll rip the funds from paypal.
Well done Mills out of my utter exhaustion of trying to labour this point across to all those who claim to be held hostage, you are the absolute first person to fully comprehend this concept.
If there's nothing more than being held hostage by a company that deny's you a refund they enjoy, it's spending hours editing forms online with Paypal that never get read, receiving bog standard cut and paste responses, or talking to Paypal customer service agents that have no power to 'escalate claims' as there is a form to fill in for that.
Personally chasing your tail sucks.
As you paid with your balance, you also have no option to claim the payment back by the creditcard company or the bank.
It appears as though he paid with his PP balance and not a CC, so maybe the point you accuse him of not understanding is not applicable here?
That being said I would not simply take a PP CS agents email as gospel, I personally would be on the phone politely pointing out that BF Labs appears to breaking PayPal ToS (and FTC regulations by refusing refunds). Keep going up the ladder on the phone it will likely yield the best results.