rgb, sorry to hear of your loss. Internet fraud sucks a big one.
To all those recommending Paypal, here are a couple of experiences of mine. As a seller, posted item on ebay and had someone win the auction using the Buy It Now option. sent funds via Paypal but I was suspicious due to the person requesting the item be sent to a different address than listed with Paypal. Delayed shipment over the weekend and discovered that the person had filed a chargeback in anticipation of the item shipping out but it only showed after the weekend. Had I shipped on Friday I would have been out of luck.
2nd experience as a buyer. again, over ebay, won an auction and paid for it via Paypal. Seller sent a "Thank you" via email, told me item would be shipped ASAP. Waited 1 week, still no item. Emailed them again asking for tracking number. They said the item was on its way and should be arriving shortly. I replied asking for the tracking info again. Got no reply and after waiting a couple of days, sent an email asking for tracking info or I would take action. Seller replied that the item was sent via USPS, hence no tracking info but shoud be arriving shortly.
After 2 weeks, I asked the buyer to return my money since USPS does not take that long. At the same time, I filed chargeback procedures with Paypal. After a week Paypal replies that chargeback failed due to inability to recover funds from the seller's account. No, Paypal would not reimburse me for the loss of $800+ and they only allow ONE chargeback attempt per transaction.
Sent an email to the seller threatening full legal action if they did not return my money. Seller replied that item was on its way and to not threaten her. after more than 4 weeks, I gave the seller an ultimatum to return my funds or I would file charges. I received an email from someone claiming to be the person's mother who admitted that her duaghter had defrauded several people on ebay and the mother was willing to "work with" these fraud victims to return their money if they did not file criminal charges. I agreed and after an additional 2 weeks, discovered that this was just a stalling tactic.
After 2 months of nothing, I filed criminal charges with the police in my hometown, in the seller's hometown, and using the email where she stated that she had sent it via USPS, filed charges with the FBI for mail fraud as well. Notified Paypal and ebay that I had filed all these charges and 4 months later, Paypal finally reimbursed me for about 1/2 what I lost. The incident occurred almost exactly one year ago.
If you buy something using Paypal, fund it with a credit card. Paypal offers hardly any protection if you fund it through your bank account. If you sell something and receive payment via Paypal, and they pull a chargeback after shipment on you, Paypal also does not offer much protection. Paypal may be convenient, but they protect the thieves more than they do the honest folk. Only use Paypal if you are absolutely sure you can trust the person you're dealing with. i.e. don't bother selling a several thousand dollar item over ebay to someone with a 100% feedback rating built on buying $0.99 Pokemon cards or something. Be equally suspicious of someone who has built their rating from buying or selling clothes in the $10 - $30 range and is now trying to sell high dollar electronics.
These days, if I sell anything over the internet, I only accept Paypal with a confirmed address, or someway to prove that this person has bought items like this in the price range with no problems. I prefer US Postal Money Orders since this involves the FBI and all checks or MO's must clear before anything gets shipped out. Any of the "Need it ASAP, please ship next day air upon receipt of payment" gets turned down. Nothing leaves before I get the funds now.