Legal Question in Mediation in New Jersey

Ebay buyer demands refund, but won't return item first

An ebay buyer refuses to send me my item before i give her a refund. I have given her 3 refunds over the past 2 weeks, which she didn't collect through paypal, nor did she return my item, so i decided to have her return it to me first. She says she refuses, even though shes a new user and i have no guarantee she will return my item. She says not to contact her unless it's with a refund. I prefer to wash my hands of it, but since the item was not allowde on ebay in the first place, i contacted my local fbi and he recommended a refund, and that i wouldn't have to worry about criminal prosecution, because fbi deals with people who actually make copies and sell illegal items, and the item i sold was bought on ebay from another user a year ago. The agent i spoke to just said to report the original seller, and that i clearly am not intentionally making a business of selling illigal items so i need not owrry about that. She claims i sold a bogus item, even though the auction clearly stated vcd (but she didn't know what that was, which isn't my responsibility) if i chose to go along with her wishes and stop contacting her about it, will she be able to sue me? I have it documented that i refunded her and tried to work with her.

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