Gee, what perfect timing...
http://www.mailpile.is/blog/2013-09-05_PayPal_Freezes_Campaign_Funds.html
The story on that link is an unusal circumstance and I can see paypal's position though their customer service did a bad job of explaining it.
Accepting money for vaporware/product is precarious for them and refunding a year later could also be an issue.
Did that guy check with Paypal ahead of assuming it would be ok to collect funds for that type of activitiy...doubtful.
Matter of fact, this is not new for paypal...they have taken the same action before.
So I have no sympathy for that guy and recommend he provide the documents to paypal or refund the money to all.