Psycho-magnification
Psycho-magnification is the process by which interpretations of events/thoughts/action get magnified or exaggerated exponentially (till a point at which it defies logic) as the thought passes through different psyche levels.

Process example : Person 1 to 2 : "Mike was stung by a bee"... Person 2 to 3 : "Mike was stung by a giant bee"... Person 3 to 4 : "Mike was stung by a giant man-eating bee and escaped only because Batman saved him."... Person 4 to 5 : "Mike is a giant man-eating bee and he ate Batman"
Mike's experience with the bee bite was subject to a brutal amount of psycho-magnification.