Fresh off news that President Scott Thompson is heading off to be Yahoo’s new CEO, PayPal again finds itself with a bit of a PR problem today. Last month we ran a story about PayPal’s severe mishandling of Regretsy’s attempt to raise funds for needy children at Christmas. Now it seems that they’ve stepped in it again. A post on Regretsy’s blog late yesterday contained a letter from a reader who had a very interesting story to tell.

It seems this reader, Erica, had sold a $2,500 violin (after having it authenticated by an expert). She received payment via PayPal. The buyer, however, disputed the label, which is apparently not uncommon with antique violins. When the buyer contacted PayPal, they determined that the violin must be counterfeit – how a violin could be counterfeit is unclear – and insisted that the buyer destroy it in order to get his money back. The buyer complied, sending the following picture of the splintered violin – with the disputed label displayed prominently – to Erica and to PayPal.

Once the post went up on Regretsy, it did not take long for the situation to be picked up on Twitter and Reddit. Most people were, as you might imagine, outraged.