Is it wrong to know someone's Facebook password?

[Ed]

1. That is a douchey thing to do. You have no right to be reading their private conversations.
2. If you were them, you would want to know that someone had been spying on them.
3. What you are doing is invading privacy and also stealing someone's identity. This is against the Facebook EULA and their Terms and Conditions and you can be taken to court and fined a large sum of money.

When you do anything online it is archived and stored away - it is not removed. Facebook have evidence of you consistently logging in from your computer and can look up in their records to see how many times you have done it.

I think you should tell the person IMMEDIATELY and hope that they don't take any further action. Think yourself lucky if you only lose a friend because of it.