Who gets the money ?
Paypal keeping it.
It seems like a way to scam their clients out of money. How much proof do they need to fine you $500 ? Do they just have to suspect it is a gambling offense and then if your balance is $1000 it becomes $500.
If I had an account, I would close it now because they could claim any transcation is gambling related. I think they just want an excuse to make a lot of free money.
Close your accounts and use some other means.