An earthquake was reported OFF Malibu

"off" is shorthand for "off the coast of" i.e. in the ocean nearby.

I assume in the ocean. But I think that's less of a rule and more about context. Since I know Malibu is on the coast, I assume the ocean. But the sentence is also missing something, i would assume it to be "an earthquake was reported off (the coast) of Malibu". If it were simply nearby, NEAR Malibu makes more sense to me.

Your friend is right. In the context of coastal areas, 'off' means in the water near the location. If the location was on land they would have just said "near Malibu"

Your confusion is warranted. "An earthquake was reported off the coast of California near Malibu" would be a more succinct way to phrase that.

Short for "off of the coast of ...."

Is this real news or language advice? lol my heart can’t take it.

In this context 'Off' is shorthand for 'Off the coast of' or 'Offshore of' meaning that it happened in the ocean nearby to Malibu

"Off \[coastal location\]" means "in the body of water near \[coastal location\]." Your friend is right. If you wanted to express that the earthquake was near Malibu but not necessarily offshore, you'd say "near Malibu."

Your friend is correct. We wouldn't say that there was explosion "off Liverpool" if it happened in Manchester. We would if it was in the Irish sea.

Because it's "off [the coast of] Malibu".

'From' could mean in any direction. 'Off' strongly implies that it is in the ocean; it is offshore, Malibu being a beach.

Malibu is a coastal town so “off it” refers to the ocean, from “off the coast.” There’s no other reasonable interpretation. If you meant near Malibu, you would say, “Near Malibu,” or, “In the Malibu area.” (And if you were discussing a place that isn’t on a coast, you wouldn’t say “off it” at all.)

Yes, it implies the quake happened offshore. Otherwise, if it happened on land, we’d say, “near Malibu.” You could also say an earthquake originated “offshore of Malibu” or “off the coast of Malibu.” These both mean “off Malibu.”