Is opening a Paypal account with a fake name illegal ?

Actually, it is not illegal. As Paypal is not classified as a Depositing institution the same laws don't apply to them. However, it is against their ToS, which means they can freely freeze your assets.
That being said actions like sending in fake documents would be illegal.
My advice would be that you don't use fake names as there is literally no point. If you open a PayPal business account (which you can have an infinite), you can use your business name and you will only have to verify your business once you reach 1600USD income.

 

It's unethical to open anything with fake things. Even if you get success in opening PayPal account with fake details, you might get into trouble, when you transfer that PayPal money to your account.

PayPal is serious with it's policies and when it finds out that account holder details are getting mismatched, you might get dragged to court and your account will surely be banned.

So be safe and follow the rules of the portal that you are using.

 

I wouldn't say it is illegal for a service such as PayPal as it is not law. Law is dependent on the country you live in, it may be illegal in some countries and can be brought to court, so consult a lawyer and do your research.

Your account will definitely violate their terms of service and they have the the grounds to immediately suspend the account.

Additionally, having a fake name does limit your account in some ways such as during a dispute, you will be asked to confirm your identity which you won't be able to do so and will lose that dispute for example. Or when transferring a large amount of money.

Generally speaking, giving fake personal info is a big no no nowadays because of money laundering and terrorist financing regulations.