What happens when paid from fraudulent paypal account?

[JonR]

I wasn’t sure which catagory to post this in, however, this category seems the most appropriate. Feel free to move this thread as necessary.

I was wondering what happens to the money when a seller receives payment via fraudulent means from paypal; wether it be hacked accounts, fake information, or any other ways to commit fraud.

Let’s imagine a person (lets call him Bob) sells a domain for $500. The buyer uses paypal, and unknowing to the seller has used fraudulent means. The domain seller (Bob) now has $500 in his account (to make it easy, his balance was $0 before). Next Bob buys a domain for $250 via paypal from Sarah. Now there are two accounts that have the fraudulent money. A week later, it is reported to paypal that the original $500 transaction was unauthorized. What happens to the money?

-Will Bob and Sarah lose their $250?
-Would the original account owner receive a negative $500 in his account balance and Bob and Sarah keep their money?
-Would Bob’s account receive a negative $500 and Sarah keep her $250?

These names and situations were made up, and do not actually represent anyone nor a specific event

[Pleski]

Bob and Sara will lose their $250.

[manish]

Bob account stands at -$250
Sara's account stands at -$250

[GT Web]

are you sure? I thought Bob lost the full $500...

[DNjet]

If you paid sarah $250 and sarah pushed you the domain then you are liable for that no matter what , the $500 fraudulant money will be deducted from your account and not sarahs because thats the account that the fraudulant money transacted to ,and not sarahs. Paypal will not recognise anything else, you will be out $250 you paid to sarah ( but you do have the domain) plus the domain you sold the frauder if you pushed it.

In the case of domains , there is really no way of reversing the transaction for non-payment or fraudulant payment I don't believe.