I bought an item on eBay from USA, I'm in Canada.. paid with PayPal (mistake was the seller sent me an invoice so it wasn't paid from eBay but directly so there was no 21 day hold as he's a new seller), never got what I paid for.. still fighting with PP to get my money back

My question is how come it's impossible to get a police agency involved? I tried local PD, OPP and RCMP here as well as sellers local and state PD - nothing. All I keep hearing is contact eBay, paypal, if that fails go to small claims court..

Amount is $4000

This since it is a purchase is often considered a civil issue, where you sue the other person.

Yes it is hard to get police involved

Not paying though eBay was a very big mistake since they offer protection when paid though them on most large purchase.

You can call police in both areas and try to make a report.

What is the seller saying about not shipping and not refunding?

He's not saying anything, email is closed, so is the PayPal account (right after money was taken out) and his eBay is closed too, by eBay I'd assume since right before it got closed he got 2 negative feedback

First your subject is misleading. There is no fraud by Paypal here. The fraud was done by the eBay seller.

As Chuck said, this is not a matter that police will get involved in. You would have to sue the seller.

Have you contacted e-Bay at all?

As a member of eBay, it was your responsibility to read policy and protection rules. That big badge takes up the whole screen. You would have known that you NEVER pay a seller outside of eBay checkout.
You have 2 recourses: the easiest one is to contact your c.c. company if you funded your Paypal with a card, and do a chargeback.
The harder one is to CALL Paypal. Go to Paypal support and type in keywords until you get a phone PIN good for 15 minutes.
But if you didn't fund with a card, and you sent the funds using the 'gift' button in Paypal, then you are 100% out of luck.
I'm very sorry - please don't shoot the messenger.