Wow. That's a completely idiotic and labor intensive scam. The guy said he was from India though, so this makes some sense. The annual median per capita income in India is $616 [1], so he only needs to try to force 4 people to pay the $175 during a year and he's ahead of the game. Perhaps 1 person per quarter will be frightened of his threat to "make a report to Pratap Nagar, Jaipur, Rajasthan, 302033, India" for "possession of stolen goods".

Obviously, you don't need to do anything to defend yourself here, other than block and report him for spam on Skype and to Odesk for fraud. No lawsuit is forthcoming, as the annual median income in India would cover approximately 90 minutes of time with a reasonably qualified attorney.

[1] http://www.business-standard.com/article/economy-policy/indi...

Edit: If it hasn't been flag killed by the time you read this, Masonlove (the scammer involved here) has made his way into this thread and it's quite entertaining. https://news.ycombinator.com/item?id=9411900