Luckily it was a cheap sale.  A $5 cd and somewhere around $3 postage.  The person bid, won the bid, paid for the auction and even left me positive feedback.  Then they told paypal someone stole their account and they never authorized this purchase.  Paypal took the money out of my account and gave it back to them without ever once asking me about it.  Now, I won't accept paypal for an expensive purchase.  $10 or so isn't going to kill me if paypal pulls that stunt again, but if it had been a decent amount of money I would have been very upset.  Just wanted you guys to know what can happen.

I get those emails too.  And I always thought they were trustworthy.  Thats why I was totally floored when they did that.  I was always under the impression that if someone wrote to paypal looking for a refund on an auction, they'd write to the seller and listen to what they had to say about it first.  But not in this case.  They refunded her money and sent me an email saying her money had been refunded due to fraudulent activity on her account.  So, evidently, someone stole her ebay account, bought a cd from me, then stole her paypal account to pay for the cd.  Changed all the contact info on both accounts so they'd actually receive the cd.  Waited a week or so to get the cd and leave me positive feedback, then change all the info back so she could get into her account again and contact paypal.  Yeah, that just makes all kinds of sense to me.  What was I thinking?  Now, if they'd bothered to ask me....do you really think they would have bought that series of events?

It was months ago.  I did write to paypal.  They sent me back some kind of form letter about their procedure when fraudulent activity is reported on an account.  Which basically boiled down to that person not being responsible for the purchase.  So......... I took the loss, and thanked my lucky stars that it hadn't been a hundred dollar item. 

$10 is a lot of money to me too.  That's not being cheap, that's just admitting you're a little financially challenged.  We don't have a huge household income here, and we really count on my being able to make a little extra cash online.  Whether it's through ebay or a rewards program or something.  And when you actually have that money and then it's taken away, it's a scary thing.  Especially when you've already budgeted that money for something and it's suddenly gone.  When I sell something that I know is going to get a pretty good price, I'll write in the auction description NO PAYPAL.  People always write and ask me why.  Once their money order is cashed or their check clears the bank, I know that nobody can just take that money away from me.  I just don't trust paypal as much anymore.

This incident has me very concerned. The amount is ot the problem.
it's that Paypal evidently answered to you second with your own money and their client and realtionship with Ebay first.
That is a lot of work to go through to get a $5-10 item. i doubt it was a theft. People say this all the time.
if this really had been a theft they would have gotten a ton of stuff way more valuable.
This is why ebay needs a fraud watchdog group.
And Paypal too.