Looks like a false alarm, Camilla responded in Site Help
Camilla Velasquez from millabear says Highlighted Post
Edited on Aug 19, 2012
Hello,
To clarify, Etsy does not refund buyers or cancel orders on your behalf without notifying you if the order is made through direct checkout. Etsy responds to chargebacks on your behalf, while keeping you informed, and most often, requesting any additional information if required. Further, Etsy bears the risk of fraudulent chargebacks.
Please note that orders can appear as canceled if Etsy never approves the order in the first place. When an order is "processing," Etsy notifies the sellers and asks you not to ship an item until the order is confirmed. If Etsy does not confirm the order, it becomes canceled and the item is put back up for sale. Emails regarding the processing nature of the order as well as it's cancelation are sent to you. At no point in that process would it appear that the order is ready to ship or confirmed. It sounds like maybe this is what happened with this order.
Regardless, we'll look into this order and convo the OP right away to clear this up.
ETA: The cancelation process for DC and PayPal work the same way. Seller is in control of this process.
Camilla
and I am relieved and feel free to ignore this thread. Thanks, Camilla! You are always so on top of things!