PayPal MUST hold payments until item is shipped. Once shipped, release money to seller. There are a lot of idiots who tries to sell nothing, collect money and disappears.
The bad thing is that if item not shipped, PayPal does not give refund to buyer. It refers you to seller which is no longer available. The question is - where is the money goes. If it stays in PayPal then it is a crime done by PayPal.