The thing is, many institutions won't take you seriously until the police are involved and there's at least a case number.
It demonstrates a willingness on your part to expose yourself to local law enforcement.
Having not done that, it implies you're possibly in on the fraud, and just shaking a money tree opportunistically to see if you can double your money. PayPal doesn't know you're not the person who cashed the check using a fake identity, or co-conspirator.
Involving the police doesn't guarantee a better outcome, but it improves the odds in my experience.
You really should have contacted them the moment you were informed of the fraud IMHO.
