Dkarmeli,
That's incredible. Reading your post, it looks like you are in Canada. I don't know what the laws are there, but if you were in the US, you could go after paypal, and possible recover some, if not all of your money. At the very least, your goods should be returned to you because once paypal issued a return to the buyer, the goods are yours again. They can't keep both the money and the goods. That's stealing.
That's incredible. Reading your post, it looks like you are in Canada. I don't know what the laws are there, but if you were in the US, you could go after paypal, and possible recover some, if not all of your money. At the very least, your goods should be returned to you because once paypal issued a return to the buyer, the goods are yours again. They can't keep both the money and the goods. That's stealing.