You mentioned it's been a while since you signed up. I don't suppose you have changed your ID and password at eBay since then and forgot to change it at AS? Have you filed a support case? You can do that at:
http://support.auctionsniper.com/ <--Click
If it's any comfort, I've never heard of this happening before. You stated you had transferred money to your account using PayPal, so the transaction should be easy to prove. Just go into your PayPal account and provide AS with the transaction ID #. You should also be able to get any free snipes back as credit for referrals. Be patient, it may take several days for them to figure out how and what happened.
Let us know how it turns out?