How do I proceed?

I took a job remodeling a business. Estimate completed, they accepted the $7800 bid, signed the contract, paid the deposit, and I went to work. This woman was a bit much, she interfered daily, tried to tell me what tasks to focus on and even gave me deadlines on individual tasks she determined could be done in x number of hours. Keep in mind we did have a final deadline agreed to. She breached the contract several times by completing work herself that she had contracted me to do. The final time was when I arrived to the job site and discovered that she had brought someone else in to do the work. No notice, no complaints, nothing. This was three days before our deadline, which I was on schedule to complete on time. She then went into the errors she claims were made and the thousands of dollars she had to pay to fix my mistakes. Granted, there were no mistakes, there was unfinished work. Turns out it was all a lie and she actually brought in a friend, her husband, and 2 other people, none with any real experience to finish the job. Probably why on the second day of my contract being terminated, a water line was hit and the city had to be called to shut off water to the entire complex bc they couldn't locate the cut off. My last day, I was unable to bring my tools with me so I arranged to pick them up the next day. But of course, like the rest of the project, things changed the next day. Now if order for me to acquire my tools, I had to process a full refund and it ha to be pending with her financial institution. She told me at that point she would decide how much i would be paid according to her analysis of the work. After spending 65+ hours and hundreds of dollars on materials, that wasn't about to happen. She and her husband then went into the typical rants, claiming I committed fraud and that they were filing charges. Even going so far as to tell me that the went looking for others I had defrauded and the list was growing larger. Well bluffs typically don't work well if you happen to know that is false. As expected, never heard anything about a criminal case. I did however hear from Paypal who informed me that these people had called their card company and told them that they never received their item. PayPal then asked for my statement and informed me that the $3200 payment and the $4600 payment would be put on hold until they were done with their review. I explained how this was a payment for service, not an item. I sent them the estimate, invoice, signed contract, and terms and conditions. I explained how I had spent 65 hours and alot of cash on their job. I also told them if necessary I could show them my time log with my hours and GPS location, the receipts for materials purchased, and the dozens of texts messages exchanged between them and me outlining next tasks to be completed, showing I was there and that they didn't receive nothing. Well I got word from PayPal today that they are what appears to be returning these peoples money to them. They have committed fraud by giving false info to their financial institution in order to acquire money that doesn't belong to them, all the while, I have all this evidence that proves what they are saying is false, but I'm the one getting taken for a ride. Even the hundreds that I spent on materials, which came from their non-refundable (clearly identified in the contractvshe signed) is being returned to them and will leave my PayPal account with a negative 7800 balance. I'm still a bit baffled. More confusing was PayPals statement to me that went something like, we've completed the review and couldn't cover the 4600 so we debited your account. We will try to collect from the other institution, but who knows. Oh, and this will take up to 75 days. It's almost as though PayPal is on my side but her card company isn't, so they aren't paying. I don't know, the entire thing is bizarre. Any feedback would be greatly appreciated as I feel as though I have some recourse here. Especially given the fact that they broke the law in order to defraud their card company, PayPal, and me. So sorry to ramble on here, it's just frustrating dealing with people who have zero integrity and no ethics. Thank you for your time and allowing me to waste some of it. Again, any feedback or guidance would be more appreciated than you know.