At this point just tell them to cease contact.with you until the investigation is complete. You fulfilled your part of the deal by packing and shipping the item. You have delivery confirmation and a photo of it. There’s nothing else you can do. Their package was possibly stolen and at that point it was their property so they need to focus their attention on filing a police report of package theft and leave you alone.

They’re trying to intimidate you talking about a lawsuit which shows they have no idea how this works.