I highly doubt that Paypal would ask for copies of utility bills, let alone photo ID, so I would be a bit concerned about this if it was me. As sswift says, have you checked that the account is actually closed? I have used paypal for a very long time now, it must be at least 6-7 years and have never experienced anything like it from them. They really never send emails asking for information, only emails providing information, like when you pay someone or someone pays you.