Hi blacknite,
First question, have you engaged in any of the conduct that is described in the cease and desist letter? Assuming you have not, I would simply write back to the solicitor explaining this and there is therefore no basis for any judicial process. I doubt there would be grounds for defamation here, because (as far as is indicated above) there has been no publication of the defamatory allegations except an accusation directly to you. If he was publishing it all over social media or something it would be different.