Frank Costello calls Billy to sit with him in a restaurant and accuses him outright of being the rat in his operation. With some clever maneuvering, Billy is able to put him off the scent. He takes a huge gamble by threatening to blow Frank's head off if he ever threatens him again or calls him a rat.
Frank pulls out a gun, cocks it, and points it at Billy.
Then Frank tells Billy that he's the new guy in his crew. He asks him why he left the bar on the night he got everyone's info and told Billy to stay in the bar.