1biggun, your friend put you in a bad situation. First off, once you knew he was a prohibited person, you cannot legally sell to him at all under Fed law. Second, now that you know he committed a new crime by attempting to purchase a gun, in some states you are required by state law to report it or face criminal penalties yourself. Third, because he went through your friend, conspiracy charges might be contemplated against the friend if he had any suspicions about his status. Fourth, by not reporting the incident they might look at you as being part of the conspiracy if they ever find out. A free consult with a local criminal atty might be in order?
THE COPS ARE AWARE IF THE SITUATION. LAW OR NO LAW I CANT LET THIS SLIDE IM PISSED GUYS LIKE THIS ARE LOOSE. IM PISSED ABOUT THE WHOLE SITUATION.