How would you deal with a situation where a friend of yours has become laughing stock due to certain situation?

I would defend without divulging.
As in “Mary has some issues right now that she is working through that I’m not at liberty to discuss with anyone. So if you all could give her a break for now, I’d appreciate it and I’m sure Mary will too.”

Does the friend know about this? And does the friend care?

What @chyna said. Well put.

I would also continue to offer support to the friend. Definitely do not tell others private information that you are privy to.

I like the way @chyna put it.

See above.
Betray confidence, lose a friend, make an enemy.

Only if the friend really needs to be defended and helped. If s/he can stand on his/her own, my owner’s interference could only make it uncomfortable. (It has happened before)

Sometimes a person needs to face their own strength.
Be supportive, even in full view of the those who offend, but do not engage those persons directly about him/her.
Showing support for your friend openly says a great deal, without further confrontation.
I just watched a movie which depicts this perfectly. It is called Griffin And Phoenix. Someone is facing death, and has a meltdown in a public place. The friend didn’t explain anything to anyone, but the hugging and comforting made obvious this person was suffering and needed some room. It is a hard moment displayed well. I think if I had been the friend, in the moment, I would not have handled it as well. I probably would have defended with some passion and confrontation.
Let me say, I admire your loyalty and friendship. This person is fortunate to have your caring.

It would really depend on a lot of things, but one thing I might observe is that sometimes we get unfair, unwanted and unexpected difficult lessons in the behavior of others and ourselves. They tend to be valuable even (or especially) when they’re very hard.

It completely depends on the specific situation.

Did the friend do something stupid? Did the friend know what he did? Was it an accident? Is the person ill?

Why are the others making fun of your friend? Does he deserve it? Are the other people involved just assholes? Was there some huge or small misunderstanding?

I’d have to know the details to make a decision.