Buying SCAM

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I have been scammed selling an IPAD.

The buyer paid in full via PAYPAL and the money cleared and I transfered it to my bank.

The buyer was in Lithuania but the PAYPAL account was in ITALY. I was given one address by PAYPAL & another by EBAY.
I confirmed with the buyer via EBAY and set the item to the Lithuania address as this is where the said person was working.

I sent the item via recorded delivery, job done, or so I thought.
As soon as I sent the item I received a PAYPAL alert for a disputed transaction. I contacted the buyer and they said (via EBAY) that it was over the cost of the postage and they wanted to know the item was insured, I said it was and they said thanks, I'll remove the dispute.

A week later the full amount was refunded to the buyer by PAYPAL. Why I don't know?

My theory is the buyer hacked into someone elses account and paid for the item then had sent to them. Either way I'm £500 down and PAYPAL are being less than helpful about the issue.

Does anyone know if I am covered, my account with PAYPAL is in the RED at this time. What should I do?
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