My kid has one friend that does many naughty things. My son knows right from wrong. He enjoys playing with his friend, but will not follow him into the street, will not hit the baby with him etc etc. Teach your kids right from wrong. There will come a time when you will have less control over who they hang out with (public school), now is a good time to teach them what is ok, and what isn't. Don't allow them to fall into the "monkey see, monkey do" scheme of things!

Or (unlike the PP said) you can do what you already said you were going to do and not let them play together anymore. Sometimes even good kids get into trouble...ever heard of the saying "one bad apple spoils the barrel"? It's true and I think you are right for not allowing this friendship to carry on anymore.

OP here, thank you for the comments and I do teach my kids right from wrong but it doesn't mean they wont do a few bad things which the other kid starts. 9:47 is right, one bad apple truly can spoil the bunch.

It's called peer pressure to the first poster. It doesn't affect everyone but it does affect some people so buzz off.

Peer pressure is definitely a real thing, and it happens at all ages. When my daughter was 3, we made friends with these people who had some kids who were close to her age. We were so happy about that until we saw how badly those other kids acted. Their parents were very inconsistent with discipline, so the kids ran all over them. We were still ok with our daughter hanging out with them until I caught her doing some really destructive things that she'd learned from them one day. I nipped that in the bud, and she never hung out with them again. Peer pressure sucks, and kids are fairly easily influenced by what they see the rest of the crowd doing. That's true at any age, to various extents.

11:33, that's exactly what's going on with my kids

sounds like you are raising some "followers". i prefer to raise leaders.