I told a friend that I was physically abused as a child and I thought I could trust him but he told people that they raped me and whipped me and sexually abused me and now everyone in the school calls me gay
that will help but it wont get you reputation back.
confront the kid who started it an tell him if he doesn't stop lieing about you then you will tell everyone what you cough him doing with your neighbors dog
seek help from your close friends, i'm sure they will believe what really happened and stand by your side. If things really get out of hand, tell a teacher what happened, they'll back you up. stand strong and don't fall. forget that friend that you mistrusted. he is just another someone that don't deserve your friendship
You should cut off all ties to this "friend". Anyone that twists your words is not your friend. Then you should go to this person and speak your mind. Don't hold anything back. Holding back your anger may seem responsible at the time, but later when you're thinking about the situation, it will catch up to you and you'll experience anger like never before. So let it all out. Let this person you don't wanna be friends anymore.
If you really wanted to get even, you could spread an awful rumor about him. Im not suggesting that though.