My friend is asking for money back from a fraudulent eBay transaction. Should I give him the money back?

I had my friend put an item on eBay that sold and the money was posted to his account. He shipped the item and paid me a certain portion of the money up front in cash and still owes me because of ATM daily cash limits. A few days later, apparently, the transaction was fraudulent, and the full amount of the money was taken out of his PayPal account, leaving him in the red. He is now asking for the money he gave me back. Because I lost my item (he had already shipped it) my argument is that I shouldn't give him the money. What would be the right path here?