Can eBay take my money?

So I recently sold a radio on ebay. When the seller received the radio, he was saying that it was not working, when it was working when I shipped it. He is now wanting a refund and I feel like I should not refund him because I have no proof that he didn't break the radio on his end. I need the money to pay... show more So I recently sold a radio on ebay. When the seller received the radio, he was saying that it was not working, when it was working when I shipped it. He is now wanting a refund and I feel like I should not refund him because I have no proof that he didn't break the radio on his end. I need the money to pay bills, and have already spent the money on that. He is saying that if I won't refund him he will sick ebay on me. The other part is that he messed up the auction and bid over the reserve, canceling out the BIN. Well he wanted to BIN so I canceled the auction and sent him a paypal invoice which he paid. Can he sick ebay on me when he didn't pay through ebay? And what happens if I just ignore him?
Update: And what do they do if there is no money in my account?
Update 2: Like I said though, the item was paid for through paypal outside of ebay. On ebay it shows that he has not paid. I sent him an invoice straight from paypal.
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