Don't know their side of the story or any records that are publicly verified to fact check this claim but if I learned something about doing business with friends and family, it's best to just nope out if you can. Some friends are best left as friends than actual business partners. The problem with this setup is an internal cause which is more toxic than external causes. In hindsight, I think the lesson you can pick up is quitting while you're still ahead instead of going into a cost sunk fallacy.
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Yeah I learned that the hard way