It wasn't to blackmail Morgan Freeman. The cop was the son of the magician who died in the safe at the bottom of the river, which was built shoddily by the company that had $100 million in illegal (?) money in the giant safe. Morgan Freemans character kept exposing the dead fathers tricks and "ruined" him or drove him to the crazy safe trick, he was also apparently jealous of not being good enough to get into the secret magic society.
Finally, Michael Caine's old man character ran the insurance company that wouldn't pay out on the safe death (or something like that) so he got all his money stolen. So all 3 were the targets of revenge by the son, who was ~12-15 when his father died. He perfected his magic, got a job in the FBI, and slowly set up the 3 performances over 20+ years to get revenge on the people who wronged his dead father, and used the rest of the magicians. Michael Caine lost all his money, the safe company lost a ton of its money, and Morgan Freeman is going to jail for stealing that money.
Only the cop/son knew the overall plan, the rest of the crew didn't even know who he was (I think), they were just brought together and given a set of instructions with more and more elaborate tricks, which they viewed as a way to get into the super secret magicians society and/or getting famous, money, etc.