I think your friend will have to find out for himself.
That said though, perhaps when you are talking to him next you could ask your friend not to relay any info about yourself to the jerk, and explain it's because he seems to get his kicks from spreading rumours. You might want to advise him to keep his own stuff private too when around him.
Don't make it melodramatic or he'll thinkk you're jealous; make it seem like you are fine with the friendship, but just wary because of the past. Also, if the friend starts joining in the insults, tick him off nad say he's acting like a jerk
Unfortunately, if it looks like your friend is joining in with the rumour mongering, it may be best to give him up as lost.
If the bully says something about your friend behind his back, I suppose you could 'innocently' query your friend about whether it is true or not. If your friend gets angry, you could explain that Jerk said it. This could backfire though; all the bully has to do is deny it and you'll look bad
