They were scamming PayPal with your help, not surprised they scammed you.
I never pay someone using the family/friend option on PayPal unless I'm really using it to send money to family. If they're worried about the 3% or whatever PayPal takes they should have asked for 3% more money to begin with.
I sometimes don't know people are like that until its too late, in those cases I send them the extra few dollars and pay normally, and never do business with them again.
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