Any of the points he was selling were scammed from an exploit in a Microsoft contest, so they are essentially stolen items. No matter how the situation was explained, it was an obvious scamming of a contest not designed to dispense the number of codes that he was "selling". Please consider the option of a chargeback / disputing the payment if you feel you were mislead in the purchase, since it wasn't clear up-front that they were scammed codes. It's assumed that people were sending him personal/gifted Paypal payments on his request to duck the fees (which isn't allowed for this type of purchase, see stickied thread in this forum), so you may have limited success in disputing the payment.
Any points sourced from an exploit like this take the chance that Microsoft could remove them from your XBL account, so it's best to work on getting the Paypal payment(s) back to make sure you're covered on all possible situations.
Edited by shrike4242, 08 May 2012 - 03:43 PM.