Am I allowed to report a scam if it wasn't me that got scammed but my friend?

My friend created a new account and added me as a friend and told me that he had been scammed for his bills hat and was a bit upset (the kind that puts you in a bad mood, not the crying type) he told me that he sold it for money but never got the money, the scammer http://steamrep.com/profiles/76561198021237355 has blocked and removed him but thankfully my friend http://steamrep.com/profiles/76561198044062952 found him on steam and it showed me that he has already been caught. am i allowed to report the scam for him because he dosent understand this site.

Hi there. You can report on someone else's behalf. Just make sure that the victim name is his, and not yours and that you ask him for the appropriate evidence and link it to the report. (Trade history, paypal receipts, chat logs and other screenshots.)
As long as appropriate evidence is provided, an SR admin would most likely investigate the report.

Thanks man, i hope my friend gets his hat back.

There are rare cases where items get brought back to the owner by a "remorseful" scammer, but in general you cannot expect such.
Only valve can force such, and they nowadays only do so in cases of hijacks. Reporting to valve must be done by your friend. Valve does do keep tabs on reports of scammers, but they wont return the items. With enough reports against a scammer, they may trade ban or trade probate that account.