I really hope you have an HR department and not some half-thought-out relegation to a manager because this is a conversation you want to fully document. (Date, time, location, and, as closely as possible, exactly what was said.)
I see your refusal to play ball causing him to shift to a strategy of moving you out of the company so that he can hire his friend instead. If he's willing to cheat his company, he's willing to cheat you. Be on the lookout for criticisms over petty things. Really check your work and CYA.
If push comes to shove and he broaches the subject again, let him know that his request made you very uncomfortable and that it puts you in a difficult position. Let him know that you can't abandon your work ethic and jeopardize your ability to be rated as a high performer. (This puts him on notice not to try his shenanigans.) Document every conversation immediately after it happens. Take notes while you meet so he knows that his words have been recorded.
If he begins trying to move you out, go to HR and bring your documentation.
I also agree with others here. It might be time to look for another role. So sorry you are going through this.
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