Ask HN: A check from PayPal to me was stolen and cashed. What can I do?

So, I had the misfortune of having money in my PayPal balance. Their broken website refuses to let me add a bank account for withdrawal, so I opted to receive a check by mail, and even paid a $1.50 for this service. PayPal issued the check on June 9th. On July 1st, I informed them that it still hasn't arrived, and that I needed to wait a minimum of 14 business days. On July 5th, the check was fraudulently cashed by an unknown third party. However, we don't learn that until nearly a month later, because: On July 9th, I contact them again. This time, they offer to stop payment on the check, to which I agree immediately. I am told to expect an email within 3-5 business days and that the rep will "personally" follow up. None of that ever happens. On August 3rd, I contact them yet again and am finally told that the check has already been cashed. After some back and forth where they repeatedly insist that I check with my "friends and family" about the missing check, I am even provided with a copy of the canceled check (which does not even purport to have my signature on it -- only "pay to the order of <thief>" and the thief's signature). They try to wash their hands of the whole thing, but I insist that they merely inform their bank (Wells Fargo) about the fraud. I am told I need to fill out a so-called "Fraudulent Endorsement Claim Form," and that I will hear back about it in "less than 28 hours." On August 5th, 48 hours later, I ask them about this form and am told "nothing to worry" (this phrase appears twice in the single message), they are working on it. On August 13th, I contact them again, and am now being told there is nothing more they will do, and that I need to contact the receiving bank (Capital One -- an entity I have no relationship with whatsoever). I reiterate that no, they need to inform their sending bank about the fraud; they just keep insisting that I should somehow "contact" Capital One, and refusing to budge on contacting Wells Fargo themselves. To summarize, from my point of view, PayPal's negligence and incompetence has: 1) Allowed the theft to take place in the first place, by doing nothing when I reported the missing check 4 days before it was fraudulently cashed; 2) Subsequently allowed the theft to go undetected and unreported for a month, by both failing to notice that the check was already cashed when I inquired about it just 4 days after the fraud, and by failing -- despite emphatic promises to do so -- to follow up on this inquiry; 3) Even now continued to impede any investigation or resolution by refusing to take the most basic step of reporting the fraud to their sending bank, for two weeks and counting. Does the hn hivemind have any clue what I can do next? I am at a loss. I have done two things so far: reported the mail theft to the US Postal Inspection Service via their web site, and reported the maddening details of PayPal's behavior to my state's Attorney General's office. I have not heard back (except for the automatic acknowledgements) from either one. Although the theft and fraud in and of themselves are not PayPal's fault, am I crazy to think that I may be able to recover the funds directly from PayPal in light of the above, e.g. via small claims court?