1) You aren't screwed, but he is, because he was the one buying virtual goods with PayPal money. So go call PayPal and tell them that he bought virtual goods with it.
2) Even if it's true and the link was for an EUW account, it would either have worked or not. Nonetheless there's
no way at all the account would have been banned within just a few hours, so that's just a bs excuse.
3) If you don't compensate the negative PayPal balance, they will block your account so you can't use it anymore until the negative balance is compensated. Also a new account won't help you as they will find out it's yours sooner or later (via IP or what not, it's PayPal tho, not just a small company, they aren't stupid).
4) You can open a thread in the TBM rating support if you're either having the e*gold trader or Premium badge/status and try to get your negative removed
5) Premium can be bought here (for 500 e*g) ->