Yes, it is permissable for a Muslim to borrow from someone in such a situation. The daleel (evidence) for this is that the Prophet (peace be upon him) borrowed from the Jews and they were dealing in riba. Furthermore, in most cases, such a person's income is not totally haram, because it is a mix of earnings gained by selling both halal and haram items. However, you should advise him and clarify to him the Islamic ruling on what he is doing.
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