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Paypal accounts get locked for various reasons. One of them is, if your country code differs from your IP address. They may assume you're a thief trying to steal someone's account.

Another reason is high priced transactions, can just get their system to freeze your account temporarily. This might take a few days to sort.

They can also block your account when there are disputes in question about a transaction you made. In a situation in which a customer of yours opens a complaint or dispute against you, you need to solve the dispute or the problem in a timely manner.

If you fail to supply all the required information, or issue a refund to the customer, your account can be blocked, and the money in it will be "frozen" until the issue is solved.

I have heard about people who have lost their money to Paypal.

Some issues are not too serious and your account is eventually un-blocked; thus you can continue to do business with it. However the history of your account issues will remain.

Perhaps you want to read these nice references:

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