Yes, there was a guy on one of the Facebook groups that was surprising people by adding 3% to their orders if they did not do Friends and Family... his buyers complained about him publicly and then everyone complained to PayPal. Eventually he made mention that everyone got him in trouble with PayPal, they were tying up his account, he had a FDQ exit and then he left and deleted the whole thread.
So... the seller in question that Cliff is referring to might have been caught violating the PP TOS as you suggest and it has nothing to do with Cliff.