The correct answer is D. He was accused of theft by his friends.
The other options are incorrect because they do not accurately reflect the tense of the sentence. Option A, He can be accused of theft by his friends, is in the present tense, but the sentence is about something that happened in the past. Option B, He is being accused of theft by his friends, is in the present progressive tense, but the sentence is about something that happened at a specific point in the past. Option C, He had been accused of theft by his friends, is in the past perfect tense, but the sentence is about something that happened before another event in the past.
The sentence “His friends accused him of theft” is in the simple past tense, which indicates that the action of accusing happened at a specific point in the past. The sentence could be paraphrased as “His friends said that he stole something.”