Someone trying to paypal scam me?

This is my first post here regarding an issue I had on Paypal.

First and for most let me start by telling you that all my information on my paypal is real, and that my address is real and that I was not trying to do anything stupid. It was an honest trade that the buyer is trying to scam me for.

Basically I posted on a forum (Tomshardware) for selling my iphone 5 which was never used and in perfect condition. I talked to the buyer on facebook and we agreed upon a price. I asked him what method he would like for shipping (express, etc), and he had said he didn't care.

I brought up the idea that my cousin is going down to the same part of San fransisco where he lives, and that he can drop it off at his house face to face. He said sure, as there was obviously no shipping fee for this. And I was being generous.

A week had gone by, I thought everything was fine as my cousin told me he had given the person the item face to face ( plus the buyer had confirmed my first and last name to make sure I'm giving the item to the right person).

A week had past, and I got a facebook message from the person I sold the item too.
It had said "I still haven't received the item, either refund me or send the item again please.".
At this point I was like what the hell, I gave him his item. I had done many previous trades on paypal, and never had this issue. I told him my cousin had even met him face to face and that I would not refund him as he had received the item. Thats when the threats started to come towards me.

Game on.

By now I'm totally worried that I'm going to loose my money plus the item I had given him. And I got my cousin to go back to his house but he wasn't there, plus his flight was 5- 7 hrs later.
The buyer had accidently sent the payment as gift (friends/family), which he couldnt dispute and paypal had denied a dispute. By now I thought that phew, lucky me, next time I'll just deal face to face, or use actual shipping so I have a shipping ID.

But thats when he got really upset. Now hes saying to me hes going to call the cops on me for something I gave to him! Are you kidding me? Can I use my cousin as proof? Does he have a case? Would this be a civil or criminal matter? Paypal said I don't have to give him his cash, but they told him to talk to his local PD. Is this case civil or criminal.

Thanks,
And have a happy new years.(What a good way to start mine) -.

I'm sorry to here your situation. You should've actually shipped it to him to prove to paypal. He can report you for fraud. And as far as I know your cousin isn't much proof. I mean come on are you gonna send a picture and a letter of your cousin to paypal. All I can tell to you is you got scammed. I wish ican help you but as far as I know there's is nothing you can do.