I think the bad guy extortionist should be held accountable but if Instagram cannot identify them then Instagram should be held accountable. These platforms need more traceability. If Instagram were liable for anon bad actors illegal behavior then Instagram would clean up their act with a quickness. There is no incentive to fix anything on these platforms with the current rules.
I see where this is coming from but making platforms fully liable for user content will make it impossible to start a business that includes (semi-) public user interaction at all. Only FAANG-size companies will be able to afford the legal fees attached to that idea.
There is no step 2. The worst parts of social media and ad clearinghouses (Jesus, all the scams Google promotes and makes money off of) are destroyed, anything remotely defensible survives. Personalized "algo" feeds and "algo" suggestions? Untenable. Customized ads served from a system no human monitors or checks to make sure they're not serving blatant scams at a massive scale? Gone. Both the incentives and ability to try to connect strangers with one another in ways they didn't directly ask for? Greatly diminished.
Ad-supported media survives (for better or worse). People can still communicate just fine. People can still publish without trouble.