Instructions
Head to Skull Island and ignore the ship anchors for now. Note that raising the ship by cutting its anchors initiates the boss fight. Fill the pump next to the house at the start of this stage with paint.
Return to the main area. Avoid the bad guys and thin the inked area next to Hook's Machine. Follow the newly-revealed ledge up then fill the pump there with ink. Repeat this two more times then Gus will tell you to fill the final pump. Go back to the house, thin the inked wall, then fill up the last pump to turn the bad guys back into pirates.
Go to Hook's Machine where there should be a pirate and a chest, instead of a pool of thinner. Paint the chest then open it to reveal the Pirate Friend Pin.