Step son now has to sleep in the bed with us everyone time he loses a tooth

My 5 year old step son is afraid of the tooth fairy because when he lost his first tooth my 16 year old daughter told him that if the tooth fairy doesn't like your tooth she will give you a vasectomy and my daughter told him the means you get your penis cut off. Yes. Very dark and terrible to tell a 5 year old. So now if he loses a tooth he flushes it down the toilet and has to sleep with me and my husband for a week to make sure the tooth fairy wont give him a vasectomy. And he still pees the bed sometimes to we wake up in Lake Will. I'm honestly about to tell my daughter that since she thinks this is sooo funny when Will gets scared she has to let him sleep in the bed with HER since she caused this.

Edit: We've tried telling him to tooth fairy wasn't real because This was getting out of hand but then my daughter told him some stupid story about how it happened to her friend and adults can't see the tooth fairy or some other nonsense so he doesn't believe us! Idk why she thinks throwing a 5 year old into a panic attack everytime he loses a tooth is funny.