I hired a trusted old friend and, after dragging our development time, he bailed on us. He told the CEO (and not me) that he was leaving. I haven’t talked to him yet…I’m still angry. I don’t even know what I would say.

I feel you. You never know how it is to with a friend before you try - sometimes it works, sometimes it does not. Try not to take it personally. It is difficult, I know... But moving on is the best thing you can do, both for yourself and for the business.

Completely ignore the situation
Any human behave irrational under certain pressure.
Tell the CEO:
I'm sorry for the situation and take responsibility. move on.
The game is 10,000 times harder than what you wrote! (of course depending on how far you wanna go)
dont panic with 10,000 :)
keep moving forward
you will see worst
drink 3-4 shots vodka/whiskey/tequila for such situation
back to work
Cheers & good luck