Yes - if you don't want to report this extortionist loser, then block his number and do not engage in conversation with him - via phone, text or email. This is yet another variation on the underage sexting scam where the scammer threatens to call the cops unless you pay x amount of dollars! I will tell you this - if you've committed a crime, the cops will come - no phone call - and no paying to get out of it.
If you are using Google Chrome, right-click the photo and select "Search Google for image." Then you can probably see where the pic originally came from.