Wow. That's BS. Keep the deposit. Unless it was clearly stated as refundable, I believe it is yours to keep. Did the BOS state anything about the deposit being refundable or non-refundable?
And paypal isn't like a bank account... if he says he had only $250 in his paypal account, that translates to either he has a $250 limit on his credit card or only $250 in his checking/savings account linked to that paypal account. Total BS.
Although, if he really pursues this hard (likely not, since it's only $250) and starts giving you trouble, you could just give it back to make it all go away. But I would def make him work damn hard to get this $250 back.
