The 28-year-old revealed what he saw while talking to Tommy Mallet and James 'Lockie' Lock after his own confrontation with Chloe, who claims she saw Pete's girlfriend Megan McKenna grinding with another man.
It came after a previous rumour that Megan slept with Chloe's now-ex-boyfriend Jake Hall, which Megan and Jake vehemently denied but Chloe didn't believe.
Pete told the boys: "At the end of the day, there's no proof or nothing and I'll back [Megan] 100 per cent. I won't let a rumour ruin what's making me happy at the minute. Chloe and Lydia [Bright]'s relationships haven't gone particularly well. That's f**k all to do with me. They can't go around with this rumour crap when there are rumours about them. Even like, I saw a couple of geezers coming out of Lydia's room since we've been in Majorca, at 11 o'clock in the morning."
When asked if he was sure, Pete replied: "100 per cent on my mum's life. Chloe Lewis was in the room as well. They might just be geezers they know, friends…"
Of course, the rumour got back to Chloe and Lydia, who told Lockie's girlfriend Danielle Armstrong what had happened had been twisted and was perfectly innocent. Lydia, who split from James 'Arg' Argent earlier this year, had kissed one of the men during a night out, then he knocked on her door with a friend the next morning.
"This crazy rumour has been made up that two men came out of my hotel room which is absolutely ludicrous," said Chloe.
Lydia agreed: "Can we just clear this up now? Me and Chloe had partied with these boys. I smooched one of them. We were so drunk we went, 'Right, let's go home.' We got in bed – crashed in my bed – and in the morning the boys came down and asked if we wanted to go to breakfast. The one I smooched and one of his mates. I gave him a kiss on the cheek, my one took my number – result! – and we went down for breakfast.
"So Pete obviously saw them knocking and probably heard me and [Chloe] having a conversation. At the end of the day, people will gossip and spread things. I put my hands up and say, 'I smooched a very good looking Welsh man and I have no regrets!'"
Lydia added: "I'm not with James. It's his fault we broke up all those months ago. I'm single and enjoying life. And I feel Chloe is getting to that point as well. You need to do what you want in life and not worry about what anyone else thinks."
TOWIE continues Sunday at 10pm on ITVBe.
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