My boyfriend's friend is trying to blackmail me?

My grandmother passed away two days ago and my boyfriend is at this camp thing for 2 weeks so I went to my closest guy friend. He listened to everything I had to say and gave me a big hug afterwards because I was sobbing uncontrollably. Hugs between us are not uncommon. I often give him a peck on the cheek too. My boyfriend's friend snapped a picture of us and from the angle he took it, it looks like I was being touched indecently by him. It's because he had his hand on my shoulder and the other one isn't to be seen... But he was pulling back from the hug!
So my boyfriend's friend is really close to my boyfriend, he went to the same primary school as us and they played soccer together during the weekend as kids. So he's convinced that if he sends it to my boyfriend he'll believe him instead of me and I'm scared he actually might. There were lots of unpleasant rumours around school about my friend and I, but we live in the same street, do the same subjects were put together to work on a 2 year long project together by a teacher... We inevitably got close. My boyfriend knows they're not true but still... It put a bit of strain in our relationship.
What should I do?
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He's listed all sorts of things he wants me to do if I don't want him to start spreading more rumours and telling my boyfriend.
Naming a few:
- Nude photos
- Blowjob
- Money...
My boyfriend's friend is trying to blackmail me?
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