Hex,

Yes you probably got screwed over, the only 2 times I've received a notice like that, I never got my money. And one transaction was for $300 but the guy hacked into someone else's Paypal account to pay me (was for programming work).

Not much you can do... Clearly the person who paid you doesn't have an account or money and Paypal can't let you keep stolen funds.

Regards,
Patrick