/etc/ppp/ip-up and /etc/ppp/ip-down should pass parameters to
ip-up.local and ip-down.local with "$@", *not* with $*

reproduce error:
If you start a pppd with 'pty' parameter the
ip-up/down scripts are called with an empty $2 (tty_name).
In ip-up/down.local all parameter positions after that are shifted
by one.

solution:
edit /etc/ppp/ip-{up,down} and change all occurences
of $* into "$@"  (with doublequotes)