I've heard a few cases of PayPal fraud. One was a guy I bought some stuff from on ebay. He was a nice guy, invited me in for a cup of tea...anyway, he got a PayPal payment from a seemingly American user, but a shipping address in Estonia, before he had the chance to send the goods PayPal were in touch telling him not to do anything while they investigated.
i.e. they know its going on
edit: I forgot to say...always, always use a credit card if you can, cos then you've got the CC company on your side if you get ripped. All CC providers (at least in UK, dunno if its a legal requirement, or just 'the norm') offer lots of protection you probably didn't know about.
I got ripped for over 300 quid on ebay, but the CC company recovered the lot, bar the laughable 30 quid that PayPal gave me.
