As you can see, as scary as this situation is for you, you should never give in to blackmail requests. You will spend the rest of your life as terrified as you are right now of exposure, and every time she needs a source of ready cash for as long as you live, you and whoever else she is extorting is going to be it.
What you're experiencing is exactly why you should never exchange explicit photos or videos on the web. She is probably not a 16 year old girl. In fact, she's probably not even a girl at all. But there are people who lurk on chat rooms just to get the opportunity to extort others, and you walked right into this one. The second that you learned she was supposedly 16, you should have cut off all contact and blocked her. Do that now, but save any messages indicating she represented herself as 18, if you have them.
Despite all of her threats, however, a blackmailer like this doesn't get a thing out of reporting you to the police. In fact, if she did that, she'd have to confess to her own criminal activities on the web. What she really wants is only to scare you into paying her the money she asks for. But if you do that, she will just keep asking you for more.
On the other hand, if you choose not to pay her, she gets nothing from you at all, and even if she does carry out her threat, she still has no further power over you. She can only report you once, if she's going to do it. And then the blackmail ends.
YOU SHOULD NOT PAY THIS WOMAN ANY MORE MONEY. That's the only way to stop her and to get out from under the fear of her. This is blackmail, pure and simple, and extortion is a felony. You need to immediately contact a local criminal lawyer and explain your predicament. Normally, I would tell you to just go to your local police and the FBI and report this as a crime. However, because she's claiming she is underaged, it's best that you go after her for blackmail through a lawyer with the DA, so that you don't incriminate yourself. If you paid her via PayPal, they may actually be able to find her. And, incidentally, you must be 18 to open a PayPal account.
So to recap for you:
- it will do you no good at all to send money to this person. If you do, you will be giving her the power to control the entire rest of your life. Hang on to your money.
- you need to cease all contact immediately with her and go straight to a local lawyer, who in turn can assist you in reporting her to your law enforcement authorities.
- if you call her bluff, she may do absolutely nothing because exposing you doesn't make her any money and she has no hold on you any more.
- if she carries out her threats, you will have representation and will gotten to the authorities with your evidence.