You can return the blackmail offer and say that you will tell everyone that they tried to blackmail you.
Depending on how the person tries to blackmail you that might even be legal consequences for them when you tell the police.
There might even be other ways you can put pressure on them. Basically that is the "dark" way.
On the other hand the "light" way is to make peace with whatever the secret is about, so it doesn't matter when it comes out.
You can also mix those two basic ways in the situation.
You might also try a out of the box reaction:
You don't have to tell the story with "A shady person whom you know but recently decided is not for your highest good".
Don't believe that the person is shady but that he should get to know you better and build a connection with him/her maybe you can teach that person to look postively on life?
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