Please Help (Paypal Ebay Localbitcoins Debt Collector situation)

[lclclc223]

A few months ago, on August 8th, after NLC2 pumped to 25+ cents, I saw that somebody was selling 2500 NLC2 on Ebay for $100. Seizing the arbitrage opportunity, I sold some NLC2 for BTC. I looked for various services where one could trade BTC for either Ebay gift cards or direct Ebay payment, but none exist(ed at the time). Therefore, I had to resort to using Localbitcoins. The deal (my first time using Localbitcoins) went along fine; I exchanged approximately 0.22 BTC for $800. The seller sent me "payment for goods or services" through Paypal and I released the BTC to the seller.

Upon attempting to purchase the NLC2 on Ebay, however, I realized that the Ebay sellers had increased the price of the order to $1000 for 2500 NLC2, which made buying them no longer viable. I now had $800 in PayPal that I wanted to be converted to NLC2. I proceeded to spend the next several days buying bitcoins through Localbitcoins. However, having only once used this Paypal account before, I was not allowed to send amounts larger than $250 from my Paypal account (sometimes less, depending on their algorithm) per transaction. After 4 deals with 4 different sellers (none of them was the first buyer), I had withdrawn over $600 from my Paypal before running out of sellers who would transact with low-volume users such as myself. With the BTC, I bought NLC2 (I actually made a little NLC2 on this move because the price had dropped back somewhat).

However, a few weeks later, I received an email from Paypal saying that the initial seller had contested the transaction (in which he/she sent me $800) and that I had to fill out a resolution form. Since Paypal does not support transactions involving Bitcoin, I wrote a (fake) resolution claiming that they had bought photography services from me (since Paypal required a shipping receipt if you said that a good was sold). I lost the resolution case because I "did not have seller protection". I now had a negative Paypal balance, but I had read online that they couldn't make you pay the amount, and therefore did not pay the issue much mind.

Today I got a letter from a debt collection agency "asking" me to pay the debt. Although what I read still technically holds true, I consider a threat to my credit a threat to act upon. What should I do in my situation? If I told Paypal that the transaction was for Bitcoins, would they reverse it? If not, I have the money to pay the debt collection agency. Please help. Thanks in advance!

[AT101ET]

Persoanlly I wouldn't pay it. Write up a report (can be a word document) clearly explaining the full story. Be concise and clear. Don't write long paragraphs but still try and illustrate everything that happened.
Include screenshots of the LBC conversation and transaction as well as a screenshot showing that the BTC was sent (to the buyer).
That should be enough. From a legal standpoint you fulfilled your end of the transaction. They (PayPal) may try to continue sending you debt collection letters but nothing will really come of it. The only thing they might do is put an address or IP block on you for creating new PayPal accounts. But even then, there are still ways of getting around being blacklisted.

Edit: You don't need to mention you buying NLC2. Just show that you were selling Bitcoin and that you fulfilled your end of the deal. PayPal may still refuse the case since they don't offer seller protection to cryptocurrency sales but I don't think you'd 'have' to pay the debt collectors.

[lclclc223]

Will this affect my credit at all?

[wheatback]

Will this affect my credit at all?

It depends on when you joined paypal. When my dad joined he needed to upload things like his ID and SSN, but when I made my account there was no proof required. If you never gave them your SSN they shouldn't be able to hurt your credit, although if you linked any bank accounts they may just pull the money.