i understand that you wish for the debt to be repaid. you care about the person who made the loan in good faith.
but...
this is classic family enmeshment. if you are not directly involved, you are not to be involved. simple, but difficult.
i think y'all need to let the chips fall where they will. addict family member needs to make things right, and he probably won't, but unfortunately, the problem rests on the one who made that loan. it's very much a bummer, but reality.