My 4-year-old daughter "played doctor" with her cousin, who was only a few months older than her at the time. I didn't know what was going on, I just figured they found something quiet to do, but later I found her laying naked from the waist down on his bed. I picked her up, dressed her and questioned the other kids in the room.
It began when she went to the bathroom and he watched her sit down. From there it progressed to him showing her how he pees and it moved to her examining him, and once she touched and looked, he did the same to her, which I was somewhat OK with. I figured it was fine until the one little girl said he did the same to her, so then I started thinking it's happening too often and he needs to let the girls close the bathroom door. But I let her go back to playing, told her to keep her pants and panties on and told him to not touch her again.
I went back out to finish talking to the adults and brought up the incident to his mother who blew it off. Then my friend's daughter came out panties around her ankles and bleeding: he had pushed a crayon in her hard enough to tear her hymen, making her bleed and feel pain. When we asked him about it he said he wanted to see where it goes.
His father isn't in the picture (his mother is a lesbian) and he said I told him not to do it with my daughter, so for a moment I looked like the bad guy until I explained I said for him to not touch my daughter and let her potty with the door closed alone. After the little girl got checked, the doctor said she is fine and no damage was done besides her partially torn hymen, the pain will subside in a day or two.
Needless to say my daughter doesn't play with him anymore at my house or his. Did I overreact to the situation or am I correct for not letting him around?