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Technically, this kind of action is "extortion" and is illegal. This sounds like it may be going on over the internet, so the question is, do you know where the guy lives or his true identity?
If you know where he lives or who he is, then you can contact the police and report his actions. However, if you do not know his identity, it is impossible to do anything about his threat at this point.
so, until he actually does this, or makes his demand clear, is there nothing that can be done to stop him? He has now dropped his email account and will be contacting me in the morning to find out "what I am willing to do" to make this right.
Only if you know his identity. Without that, there's no way to take any action against him. If you do know his identity, then the treat to extort is an attempted extortion which is a crime. You can report this to the police.
Also, if you know where the person lives, you can get a temporary restraining order against him, ordering him not to contact you or mention you.
legally, couldn't they find him by his IP address? He contacted me from gay website.. they would have his identity. Can't he be sought out BEFORE he does the damage to me and my family? Do I need to just wait?
Technically, you can locate someone by their IP address. However, this is not something that a police department is going to do, or is required to legally do. So, it sounds like you have to wait for him to reveal himself before you can do anything about it with the police. Nevertheless, there may be something the police could suggest in this situation, or some computer crimes section that could help you. You'll need to contact the local police to find out. You might also try reporting the threat to the FBI. They have a lot more resources.
Your other alternative would be to hire an attorney to seek a temporary restraining order and hire a computer expert to determine his identity through his IP address. Of course, this would be expensive.
At this point however, he has not demanded any money or other action by you in exchange for his keeping quiet. Make sure to record his demand (which makes what he is saying a crime) is recorded.
BTW, I've helped other customers with this same sort of threat coming at them. The person making the threat is usually unable to actually do anything to "out" you. Also, how does he know your not out already? And how does he know your real identity? He may be just bluffing.
he contacted me on a gay web site. I invited him to my home. we had a quick stupid hook up. He left and then later sent me emails stating my full name, townhome assocaition relationship etc. then immediately with the threats to post pictures on my wife's facebook account, contact her employer (she is no longer working there) but he doesn't know that..
The fact that he came over means that he is local. The easiest way to get to the bottom of finding his identity so that you can take action against him may be to hire a private detective with the ability to do IP address research. In order to take some sort of preventative action, like having a restraining order issued against him, or getting him arrested for attempted extortion, is to find his identity.
You could attempt a "sting" on him. You let him contact you, tell him you will agree to pay him something, but only in person. Have him agree to meet you somewhere, then call the cops and get them to arrest him when he shows up. I'm not certain they will agree to it, and if not, you could then take his photos or have a Private Detective show up and follow him to find out his true identity.
Just some thoughts.