Just set him up for an ass beating, Id have him meet me some where semi public, like a bar, and have several of my boys there spread out looking like regular patrons of the place. When the guy made himself known, we would surround his ass and he can either give up the phone, or get stomped into the ground.
Then once I had my phone back, he would get stomped the fuck out and damn sure made known why he was getting the beating for trying to blackmail me.
Either do that, or just tell the cops someone found your phone and is trying to blackmail you for money to get it back. Then they will set up a sting, nab his ass, charge him, and you get your phone back. They are not going to bother looking at your phone.