Am I being cynical just because I don't trust giving money to a friend?

My friend called me cynical yesterday because he got ripped off by a close friend of his for a very large sum of money(in the thousands). He received the item, but it was lets say..not what he expected and almost a total loss. I told him that he seriously has to be careful and not to be so quick to give thousands of dollar to someone even if its a close friend, especially for something that is not legal. I said that it's not only the friend, but other factors involved that can cause you to lose that money or get into a worse situation. He called me cynical and told me that he does not live that way and he trusts his friends. I told him I trust him too, but I would probably not give him $5k for something illegal. I told him if it was for a hospital bill or something, yes i would probably give him money, but not for something illegal. He got mad and said he would give it to me and he doesn't want to live a life not trusting anyone. And he will continue to be gullible and give money to people even though he is being taken advantage of. I told him he needs to be more cautious because you really can't trust everyone. Trust needs to be earned. I definitely believe people can be good and I try to be the same way. I am not saying all people are bad and untrustworthy. I'm just saying I don't trust giving large amounts of money to a friend or whoever for illegal activities or items. Am I being cynical?