What should I do about this matter?

I'm in a pretty tough situation right now and I would like to get advice on some possible ideas or outcomes you may have regarding this.

Let me start by explaining the story. I bought an iPhone on eBay. To pay for this phone, I withdrew money from my account and went into the bank of the seller and paid it directly into their account. My name was recorded on the transaction. I got a receipt for this but I misplaced it when clearing my wallet out. The bank was able to provide me with a duplicate copy.

Fast forward a week later. The seller messages me to say that their account had been hacked and they did not authorise the listing, however paypal and ebay would reimburse whatever was lost in this time. I thought this was strange, but went along with it. The seller asked me to wait 3-5 days for the money to come into my account, but I wasn't relying on it. And it never came. So I reported it to their bank and eBay, and after a lot of mucking around the bank refunded me half of the money, which was highly appreciated. I have tried twice now to inform my local police but they are not taking any action. I've been keeping close contact with the bank and they find this very strange that they will not do so. They suggested going to a different station.

What can I do from here? I could accept the money as lost but I really would like to get it back. I've tried everything I can and I can't seem to think of anything else.

First off, Paypal has absolutely nothing to do with the transaction. Secondly, eBay has absolutely nothing to do with the money exchange of a transaction. They assist in money disputes but, any refunds would have to come from Paypal. Since Paypal was not used in this transaction, neither eBay nor Paypal has any authority over the money you paid.

How is the seller able to reimburse you directly into your account? Your bank account or Paypal account? Did you give him your bank account details or your email address to pay you through Paypal?

You had no business reporting anything to their bank. The seller is their account holder. What do you expect them to do about complaints against their account holder? That was an inappropriate and ineffective move.

I would not expect eBay to be able to do anything for you because you failed to use the payment method they recommend and that they have authority to oversee and resolve issues.

Of course the police will not do anything about it because it is not a criminal matter. EBay transactions are contract (civil) disputes and eBay's resolution policy is disputing transactions through them. Since you did not use Paypal, you removed the authority they had and took it upon yourself to make payment directly into the seller's bank account (a stupid move). You gave away all the protection that eBay and Paypal offers.

Since the seller's bank is apparently near to you, they must live nearby. Their address is available on eBay's website, if you look hard enough. It takes a bit of time - I have not done it often. Visit the seller and ask for the balance that they owe you. If they do not pay you, tell them you are going to file a dispute with eBay and do everything you can to get their account suspended and you will also file a report of theft with the police. Of course, this is a bluff because you can't do either of these things. You have no legal recourse whatsoever but, hopefully, the seller is ignorant and it motivates him to refund the rest of your money.

Use Paypal from now on, and ONLY Paypal. It is your ONLY protection.