Update I digged into the transactions a bit and understood this: The autosweep on my account got reversed & paypal was still showing balance in USD in my account. The reversal of autosweep took 3 hours and in that amount I lost 300$ out of $4804 in currency conversion.

Then I initiated the transaction to transfer to the bank myself but only for $2402. If they had some retries on the auto-sweep there is a chance their system got into some deadlock state in that time period. Their customer support cannot comprehend this & have no idea about Bank Regulations or about policies. They are treating this as if there is a small glitch on facebook while throwing a sheep.

edit: removed transaction details