It's a very tricky line. Kids do stupid and thoughtless things when they are hanging out with others, and mine are no exception. I think that ultimately it comes down to redemption. If you think that yoru kids can cope,or the boy can grow out of it, or you still have some traction with him in terms of bahaviour change, then it's probably worth explicitly demonstrating grace to your kids and persevering with the relationship.
If he's a net negative in your family life and you don't see that changing in the foreseeable future, then it's probably best to quietly cut ties with them. I don't understand the dynamics between your family and theirs well enough to say which is the best approach.