Badger

Glad to see that you know your rights! They could *try* to take you to court, but they would not be successful. For one, their TOS does not supersede copyright law. For two, you can't sue someone for breaching a contract they were never even told about. Technically, if you want to get into it, he still owes you for the sketch, since he was the one that cancelled, but it ain't worth the hassle. Hopefully you can find someone to resell it to, since it's a pretty generic "fluffly dragon" design.

You're way outside the chargeback window; you were outside of it when you sent the email in December, actually. But you could have opened a paypal dispute without writing out an AB, and I wish you had. Unfortunately, short of going through your bank or your credit card company, you're probably not gonna see your money, which is horrible. I agree with contacting FC to let them know about this, I despise when cons don't protect their attendees, so hopefully they do something.

For the record, I often copy paste the ref I'm working with onto it's own layer in the image I'm working on, and shrink it down to put in the corner. Then I just delete the layer before sending anything out. It's just easier than flipping between tabs in CSP, or having them side by side in different windows. Guessing this artist did the same, and just didn't delete the layer (very weird, not sure how you wouldn't notice it before you sent the client their file). I also grab my colours first lol, to prevent grabbing the wrong one from a pixelated file. The comment about your ref is pretty ridiculous; you can very clearly see that the pawpads are white in the ref you provided, not pink. And the swatches are another context clue, if the artist couldn't figure it out. If they were still confused, they could have sent a quick message asking. Very unprofessional; all they had to do was go,"Oh sorry, I'll fix that as soon as I get a chance!"