PayPal taking the side of Fraudsters?

It seems PayPal makes it's own rules whether or not to accept that a customer has experienced unauthorized payments from his or her account. Not a good policy, IMO.

Take this story from Chris Pirillo.
A summary: someone was able to retrieve his iTunes password thanks to lax password retrieval security over at Apple. (Apple have now resolved the issue, according to the story). Using Chris' account, the fraudster was able to deduct US$450 from Chris' PayPal account - cash spent on iTunes Gift Cards.

With this background, and the backing by Apple, you would think Chris would get his funds back, right?

Wrong!

As it turns out, PayPal deems the deduction was


and decides that they will NOT return the funds stolen.

What should PayPal do? Should they turn around?
Perhaps it is time to use the Marketing Power, and stop using PayPal until they reach a better vetted stand?

And - is this the first time PayPal does this, or is Chris' case the last in a long row?

Can we trust a banking service that does not care for it's customers?

Do you think PayPal is taking the side of the fraudsters in this case?