I disagree. There was leverage to balance the sheet. The room mate was trying to steal money from him. Say anything that is legal to get it back and barring that get the cops involved (a last resort since that greatly complicates a situation).
Then assess the situation. Bad behavior shouldn’t be rewarded. There’s no reason the room mate should ever know how the parents learned that information. If the parents were tactful they would use the information to make a plan to bring it to light organically.
I was happy to get out of there. It's not like I could have reformed them with a good heart to heart talk. Once I went to do laundry and stepped barefooted into a steaming pile of dog poo their dog had dropped on the laundry room floor. When I complained, instead of apologizing for it, they told me I should have watched where I was walking. My roommate was a genuine asshole, and just getting them out of my life was amazing.
Oops, I misread it. Though I think my general argument still stands: the ex roommate knew a lot about OP, and was immoral. As long as OP knew his secret the ex roommate couldn't retaliate.
If OP had outed them, they would have further angered the ex roommate and freed the roommate from consequences it they wanted to get revenge on OP.