Dwarf refunded all the paypal buyers
let me correct that for you:
Paypal took actions related to fraud and possible illegal activity.
Yes, probably. However paypal will lock down your perfectly legit account too for a laundry list of reasons. I have been a part of several completely legitimate product sales where this happened when a sudden influx of money happened in said account. It took a long time to resolve, but was indeed resolved, and I received my product and those companies/individuals now continue in business.
So yes, most likely, but you do not know that for a fact.