yeah they can, if you read the 50 pages of TOS they can certainly withdraw from your bank account in a matter like this. Usually people (or scammers) who go negative on their paypal clean out their bank account associated with paypal and shut it down.
not worth it over $100 or something. Some sell like 300 iphones they don't own before paypal catches on to the INR disputes and they suspend them, by that time the seller gets away with murder.