The Fair Labor Standards Act places no limitations on the work of 16 and 17 year olds in non-hazardous jobs, and in any case does not concern itself with non-employment relationships like the one Paypal would have had with this 17-year-old.

There is a reason that you read about minors running their own businesses all the time. The laws are targeted at employment that is exploitative or interferes with a child's education. Not at things like this.