What are the proper channels to deal with an extortion attempt that begins with an email?
Should this be a federal matter or more of a local matter?
The wannabe extortionist is known.

Hmmmm, I would contact the local authorites and go from there. However, think before you do this. Is there any chance anything will fall back on you or is it to the point where that doesn't matter?

 I would also let people discreetly know about this. Post something concerning this on message boards but do not post indentifying information. Usually, if you make everything public you will get a flame war started. Use your judgement when letting people know exactly who he is: Are they the type person who will instigate trouble somehow?

Only my opinion, hope it helps.

 Hugs,
 Ivy

I hope that helps.

The fallout from this attempt is inconsequential. In fact, they have mistaken me for someone else.
The fact that they have initiated contact proves that they are an instigator, and the failure to cover their tracks proves that they are not very bright.

Thank you.