I think your son needs you more than ever and this decision could affect whether he has a happy future or one spent in jails, fights etc,
He needs boundaries, guidelines, love, patience, and rules that show him you care and are not giving up on him.
His father is treating him like a pawn in a game and he needs to know it is ok to feel confused and angry but he is not responsible for making his dad happy or help him get out of paying $.
Is this the price your ex puts on his son's happiness? $200 a month, what a sell out.
He is probably acting out to see if its true that you'll abandon him like his father says, y'know?
Also, I am sure they are using the new baby to amplify all your son's normal insecurities.
Please do not give up on him. You'll be handing him over to manipulative people who obviously don't care for his well-being, only their own.
Try family counselling, extra one on one time, enforcable boundaries, rewarding good behaviour and maybe mediation between you and ex? Find support for yourself and your family, and try everything available.
Good luck, please don't give up on him - he'll appreciate it later.