Green’s Dictionary of Slang

1. (N.Z. prison) to assault and beat after covering the victim’s eyes with a blanket or pillow-case.

1994		B. Payne Poor Behaviour 116: [M]ost of the other creeps are regularly blanketed and beaten with iron bars, while their beds are filled with piss and shit and some are scarred for life.
2001		D. Looser Boobslang [U. Canterbury D.Phil. thesis] 20/1: blanket v. 1 to assault somebody.

2. (N.Z. prison) to provide an alibi or excuse.

2001

D. Looser Boobslang [U. Canterbury D.Phil. thesis] 20/1: blanket v. 2 to provide an alibi or excuse for another person, to 'cover up' for him.