Tenant deposit claim

Tenancy Deposits

Hi, 
I was wondering if anyone has been through a similar situation and maybe able to provide any advice please?

My friends have rented out a property and used a well known agency to fully manage and let the property.
In short the agency didn’t protect the deposit within the 30 days and now the tenants are asking for £10k compensation.

It all came about when the landlord tried to make a claim against the deposit for damage/ rubbish and cleaning, then the tenants came back with the £10k claim against the agents. The agent have offered them £5k to settle out of court to which the tenants have declined.
The agents have now washed their hands of the situation and told my friend that as they are the landlord the book stops with them and to sort it themselves and are refusing to communicate with the landlord.

My friend is about to pay them the 10k but something just doesn’t sit right with me. The whole situation is just wrong. He fully intends to take the agency to court after he settles with the tenant.

Any advice greatly appreciated?
The agency are still holding the original £1800 deposit and refuse to communicate with the landlord.

He has taken legal advice but at already £1000 later he can’t continue with the solicitor.

Original deposit £1800 
£10 k claim is £7,200 deposit claim and legal fees

Many thanks 
Katherine