I don't see it stated anywhere that they kept the money. Based upon the fact that a paypal dispute was behind the entire situation, it is very likely the customer simply filed a paypal dispute because he didn't agree with something that happened rather than outright asking for a refund.

As a company that has provided paypal support for products in the past, disputes can be a massive headache and there are certain customers that use the process to their advantage (i.e. using a service for 30 days then filing a paypal dispute claiming the service was broken etc.)