Ellie Anne couple of things you might want to think about that might give you some insight into your situation.
You are feeling hurt and I understand that and I am sad when people go through these situations. Firstly I'm guessing you feel that you have been unfairly treated. Going on what you've said you have been unfairly treated and yes that hurts. Now what do you want to do to keep you safe?
If you start by accepting you are feeling hurt and saddened by the situation then you can do the best you can to take care of you and your feelings. There have been some very good suggestions already but how you take the best care of yourself and your feelings is up to you.
If I have understood your post your friends family is chaotic and destructive, prison, drugs etc. Therefore, there will be a lot of "Drama" around her and in her life. Her telling you that the other person is telling lies about you just keeps the "Drama" going.
It's the energy, the hight, the power, that people get from these situations that feeds them.
Your feelings Do Not count.
No-ones feelings count, people get hurt but that won't stop them. Being Queen Bee, centre of attention is what drives these situations and you can either stay and get hurt or step away and let the circus of these two women go on without you.
Also "seems" to me as if your friend has (may be out of awareness) set up a situation were she gets you and the other person to compete for her friendship. It's an emotional tug of war if you will.
In my hardest terms I'd say there is emotional blackmail going on but I could be wrong.
I'm also wondering if your friend feels "Inferior" to you as you have been the steady, helpful, supportive friend in the past (the donkey) when she has needed you. And may be now with this other friend she can feel "Superior".
As someone has already said, you know things that may be the other friend doesn't. I'm guessing you given lots of sympathy and support as things were happening but with this other person she may get lots more sympathy and support for what's happened in the past. If she tries to re-tell, re-work past situations with you to get fresh sympathy or to tidy things up you will be on to her. This other person may not be and so the "Drama" goes on.
Do you really want to be part of that emotionally damaging circus? What will you miss if she isn't in your life? Were you Valuable as a friend or were you just Useful???
Because when you strip all the noise away that's the big question. Was I Valuable or was I just Useful ?
If you have put yourself in past positions to be taken advantage of (for the best of reasons) now is the time when you can see "What's Real, What's Not Real and How to Tell the Difference" (Terry Pratchett).
Then you can get on taking care of you and your feelings because one thing I'll put money on (and I don'r bet) is that your friend is more interested in being in the middle of lots of "drama' than of giving a hoot about your feelings.
If you are inclined to talk to her about how hurt you are I'm guessing you will just be feeding her ego by showing her how important she is and confirming to her how easy it is to hurt you. But as always the choice of how you go forward is yours.
Think about how to take care of You from here forward. I wish you the very best of outcomes.
Oh and if you want a bit of insight goggle The Drams Triangle.