Hey guys, I'm new around here.

A few months ago I was doing business with PayPal selling digital goods online. There was a lot of work so I decided to entrust a friend with a lot of goods and he started selling them and sending the money minus his cut (20%) to my PayPal.

After our dealings were over, however, he decided to chargeback a few of the payments he made. I had an issue with PayPal before this and they told me they will be closing my account and let me withdraw my money, which I did. So now ("now" being 3-4 months ago), months later my PayPal balance is at 0 and I'm done with them, when I get mails telling me my dear "friend" charged back over $ 4.000 from me and they are demanding I put money on my account.

He claimed unauthorized transactions through his bank. Payments were sent as GIFT. Before this he also tried to chargeback all gift payments made to me, about $ 8.000 total, claiming someone went on his paypal account. Luckily, PayPal denied his chargeback after investigating.
I explained to them how this guy is attempting to steal money from me and that I am in no interest in helping them give a thief money from my pockets. I made screenshots of all our Skype conversations, added neat comments and sent it to them and they denied my appeal.

Few weeks later I got a letters from a collections agency, demanding I pay an initial sum of my debt to PayPal (totaling about $ 4.500).

I actually even went to a lawyer for this. Just two weeks ago he mailed me telling me the case isn't going well...

Anyone know what to do with this? I really don't want to give PayPal compensation for the money they literally gave away to a thief.

I don't know if it's allowed, but I'll gladly offer some compensation if someone can help me out with this.

Thank you