Don't ask us what to do. Don't ask Medium what to do. You have a VC... ask them what to do. Your current VC has probably seen stuff like this before. They will have legal expertise available to you, as well as their experience and their judgment. Ideally, you pick a VC based on their value besides mere money anyway. They should be good advisors.

If your VC says just don't engage, then don't engage. If your VC says pay them, get a second opinion coz that's BS. But odds are good that your VC will happily call them up for you and give them a good stern talking-to.

For all the calls of "sunshine" here, your own VC is in a much better position to badmouth them than we are. Toxic behavior like this can get them cut out of ride-along deals, and they don't want to lose the opportunity to be co-investors on the best deal flows.