it is ok, he signed paperwork when they hired him.. its a conflict of intrest.
Why didn't your friend work on the new product? There is more to this story than you are sharing.
But yes, you are technically right.
For your last question, I don't know, I didn't ask, but he's responsive on social media / LinkedIn, feel free to ask. I'm just posting it because it seems when he posted it it got flagged as spam... don't kill the messenger :)