This whole thing reminds me of an incident I had with an Ebay purchase gone bad about 7 or so years ago. I bought a set of rims from an Ebay seller in Tacoma, WA for $600. Well, the seller never delivered on the good and either ignored my emails or offered sorry excuses. On the last day possible for filing a grievance with PayPal, i filed my formal complaint. Paypal subsequently judged in my favor and awarded me the grand sum of something like $11. That was because (as others have already said) Paypal will only award you your loss UP TO the amount in the offender's PayPal account... and that's all that was left in it.
So I went back on Ebay and contacted various individuals that had bought/sold from the offender in the recent past (and also found out that the account wasn't the offender's but his girlfriend's) and convinced them to give me the offender's name, address, phone number among other details. I then made multiple phone calls and left mulitple messages and I think I may have even sent a letter.
Then I chased around with the Illinois State Police (I lived in IL at the time), the City of Washington (IL) Police Dept, the Washington State Patrol, the Thurston County (WA) Sheriff's Department and the City of Tacoma Police Department. None of the departments wanted to touch my case because it was an "Internet Crime" and was "Out of their (respective) jurisdictions". The Tacoma cops also added that the offender lived just outside of their city limits.
Frustrated, I went around the system (calling just about every number I could get a hold of for the respective departments, hoping to find a way past the frontline phone operators) and finally got a hold of a deputy from the Thurston County Sheriff's Dept who was willing to work with me. I gave him all the info I had including the offender's contact info.
Two weeks later, I had my money back.