I've dropshipped some goods to an UK buyer, previously I tell him, not directly that goods were not originals (not directly, and for the price he must know).

After few days he filed a non-received goods complaint, days later escalated the complaint as not exactly as described goods.
And he started to send intimidating emailsa about reporting to interpol if I do not refund full in some hours.

Of course, the guy is an azzhole, and wanted all for free since the beginning.
By the way, that guy sells burned CDs and DVDs of rare but unatorized material.

Should I give full refund, or ask for returning goods?

Is there a risk to get the paypal account limited?

since the operation was out of ebay, I want to know if still can win the paypal dispute and get back the goods.

Lol, my paypal is on temporary hold. Paypal is asking if I've shipped the goods or not.