Indeed it is. In fact, any sand called "Hermit Crab Sand" is bad for them. It clumps and smells funny when you moisten it, and dyes everything it touches. Your friend is better off buying a 50 lbs bag of play sand from a store like Lowe's and using that. Its cheaper anyways.
That is a super terrible idea. Painted hermit crab shells flake off, no matter what you do and the crabs themselves eat the flakes. Even non toxic paint kills hermit crabs. They are that sensitive to it. Besides, natural shells are so much prettier than painted ones.