You should always aspirate when injecting an oil-based substance. This will indicate if you have hit a vein and prevent some serious problems.
Yes, it sound like your friend punctured a vein. Aspirate! It is possible to puncture a vein on the way in and out. When withdrawing pull the needle out at a 90-degree angle from the injection site without any lateral pressure. Straight in and straight out. After you withdraw the needle apply a cotton swab and apply firm pressure for about 60 seconds. This will minimise any bleeding and by reducing the quanity of blood between muscle fibres there wil be less post-injection pain.
Regarding the shortness of breath, it sounds like a panic attack, i.e. an acute attack of anxiety due to the sight of the bleeding, concern with stopping the blood flow and thoughts about what it means. Is your frriend prone to anxiety?
Remember: enter at 90-degree angle (i.e. straight), aspirate, inject, withdraw at same angle as entry without any lateral movement and then apply firm pressure to the site for 60 seconds. If you do this any bleeds that do occur should be minor.