Helping a friend hide something that’s hurting someone isn’t loyalty. It’s being an accomplice with better manners.

Covering for someone stops being loyalty at the point another person gets hurt. It feels like solidarity, because the alternative involves confronting your friend, but the arrangement has a third party in it who agreed to none of this. Politeness about it does not change what you are taking part in.

Tell your friend, once and directly, that you will not carry this part. You can stay their friend while declining to be the mechanism. If someone is being harmed, your friend is not the only person whose interests are in the room.