PayPal holding funds for account with a pseudonym / nickname

I opened a new PayPal account mid 2016 with a pseudonym to use with an ebay account I use specifically for buying. I also have a well established PayPal account I use for selling. I have been transferring funds between the two accounts with no problem for the last few months... That is until Sunday.

 

I transferred funds to my new PayPal account which took the funds in it to over $1200... I went to make a purchase & the next thing I knew PayPal have limited my account. I got this message  "Until we can confirm the information you've given us, we need to limit most of the functionality on your account. For now, you can continue to receive payments but you won't be able to withdraw funds or make payments"

 

So, I uploaded scans of the info PP wanted - Medicare card / rates notice & passport. The passport was rejected... so I called PP customer service..

 

I was told PP need a passport or citizenship document showing my pseudonym to be my legal name.. Which obviously I cannot do!!

 

Cutting a long story short PP basically told me I'd have to get a legal name change to withdraw my money.. I then asked them what would happen to my funds if I was unable to do this... answer was unclaimed funds go to the government... I'm astounded that PayPal can get away with this s**t.....

 

Does anyone have any advice on what I should do next... I'm spitting nails that PayPal will still let me receive money into my pseudonym account but not let me withdraw it & knowing full well I may lose my money...

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I'd imagine that paypal would come under laws relating to money laundering in the same way as all banks, and this would be why you have to prove who you are.  Anyone who opens a bank account under a different name to their real one would have to expect problems sooner or later.  To call a spade a spade, you've opened it in a false name, and this would wave a red flag to both paypal and the government.