In the meantime, try to work it out with him. First, ask what he did. Second, tell him you need a few days to figure it out (all the while, waiting for your payment to clear through PayPal, allowing you to deposit it to your bank account). Third, say you did what you could to figure it out and send it back to him. Then wait for PayPal hell to break loose.
At least this way, you'll have your money.
I have to warn you, though... your PayPal account may be closed if it goes to dispute, he wins, and you have no funds to pay him with. (This is why I advised you to take off any credit cards/bank accounts associated with PayPal). Just having to simply make a new PayPal account is much easier than being out hundreds of dollars and stuck with a crappy phone. He did what he did to that phone and you shouldn't have to pay for it.
This may not be the most ethical way... but it ensures that you will get your money.
Good luck!
If PayPal sides with the buyer, then paypal will refund his money and the seller will have a negative balance. They WILL send him to an outside collections agency if they can't recoup the funds.