Engine have governor for a reason. They are not design to run at excessive rpm. When they do internal damage can occur. There could be any number things now wrong with the engine that only complete tear down would reveal. It does sound the piston rod is stuck to crankshaft but that is just a guess.
If he is a true friend he would be paying for the repairs or a new generator which ever is cheaper. Subaru has exited the small engine market and Yamaha brought that division. Parts availability is unknown.
From Wikipedia>
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