A recent series of U.S. Department of Justice actions highlights the agency’s focus on combatting so-called “pig-butchering” — a type of online financial scam where fraudsters build a long-term relationship with a victim to gain trust and then convince the victim to invest in fake cryptocurrency or trading schemes. In the following guest post, Sarah Abrams, Head of Claims Baleen Specialty, a division of Bowhead Specialty, takes a look at how developments in the crypto world coinciding with the DOJ’s crackdown may be creating increased D&O risk arising from pig-butchering schemes. I would like to thank Sarah for allowing me to publish her article on this site. Here is Sarah’s article.
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A planned reverse merger between a cryptocurrency (crypto) company and a gaming platform, coinciding with an increase in “pig-butchering” scams, may raise additional concerns for D&O underwriters in the wake of increasing corporate acceptance and use of crypto tokens.
To be clear, nothing in this article suggests that Dogecoin, Brag House, or inKind are in any way involved in the below-discussed pig-butchering schemes. The connection discussed is not about wrongdoing by the merger participants, but rather how the rising corporate adoption of crypto tokens, such as Dogecoin, may create new oversight obligations while crypto-related fraud continues to make headlines.
“Pig butchering” schemes typically involve grooming victims over time (via romance, fake investment returns, or social engineering) and eventually coaxing them to transfer large sums into crypto wallets. In mid-October, the U.S. Department of Justice moved to seize $15 billion in Bitcoin tied to massive “pig-butchering” fraud operations. In July, two banks were sued for allegedly ignoring red flags related to a $20 million loss resulting from a “pig butchering” NFT-related scam. This convergence of token integration and increase in pig-butchering may create an emerging D&O exposure for companies adopting or facilitating token transactions if their platforms inadvertently process tainted assets or lack adequate monitoring controls.
D&O Diary readers may recall that I recently discussed a potential near-future where merchants substitute stablecoin rewards for credit card points. Following its announcement that the House of Doge (Doge), the corporate arm of the Dogecoin (cryptocurrency) Foundation, would be going public through a reverse merger with gaming platform Brag House Holdings, Inc. (Brag House, NASDAQ: TBH), Doge stated that it had signed a letter of intent to form a strategic partnership with hospitality and award payments platform inKind.
The Doge IPO and its initiative with inKind may lead to increased acceptance and use of Dogecoin by users of the new Doge-Brag House platform and inKind’s network of restaurants. While this planned integration illustrates the broader trend that crypto tokens are becoming embedded in mainstream consumer, gaming, and payments ecosystems, at the same time, federal regulators are reporting unprecedented surges in crypto-enabled fraud, most notably pig-butchering schemes.
To appreciate the potential D&O underwriter impact, the following will discuss how pig-butchering may create D&O risk for companies embracing the use of crypto tokens, using the Doge-Brag House push to have inKind network partnership accept Dogecoin.
Pig-Butchering
In many pig-butchering operations, scammers rapidly launder crypto through anonymized wallets, then through centralized exchanges, OTC desks, or gaming and rewards-based platforms. A company using tokens for rewards, loyalty programs, or payment processing may therefore unknowingly process crypto whose history includes illicit activity. Thus, once tokens are transferable, tainted assets can intermingle with legitimate flows unless strong anti-money-laundering (AML) and know-your-transaction (KYT) systems are in place.
Pig-butchering schemes have been rising in recent years to the point where, in January 2024, the FBI created Operation Level Up, an approach to identify victims of cryptocurrency investment fraud and notify them of the scam. In early October, federal law enforcement and the U.S. Department of the Treasury announced the filing of an indictment and seizure of $15 billion in Bitcoin that had been earned from and laundered through a criminal pig-butchering network. The alleged criminal enterprise, Prince Group, forced laborers to spend hours online and cold calling to induce victims into crypto investment scams.
While the Prince Group may not have been involved, a recent lawsuit filed by a Texas investor and victim of an alleged pig-butchering scheme claimed that East West Bank and Cathay Bank “ignored red flags” in facilitating the victim’s nearly $20 million in payments to NFT enterprise OpenRarityPro. According to the complaint, the victim sent at least 30 wire transfers to companies that were allegedly linked to OpenRarity Pro. The victim alleged that the funds, which were transferred in large, round numbers, should have triggered his banks to investigate the “suspicious activity.”
Using the Doge-Brag House transaction and agreement with inKind for future Dogecoin utility and integration as an example, certain emerging D&O risks flowing from pig-butchering may begin to surface.
Dogecoin and inKind Partnership
On October 13, 2025, House of Doge and Brag House announced a reverse-takeover merger under which Brag House will acquire House of Doge via a public shell consolidation, providing Dogecoin with a pathway to a Nasdaq listing. House of Doge is the corporate arm of the Dogecoin Foundation, and Brag House is a platform for gamers as well as the host of various esports tournaments. Brag House purportedly already leverages crypto, allowing its users to bet on upcoming gaming events using earned Brag House Tokens, which can then be redeemed for prizes such as gift cards and merchandise.
The newly merged companies announced a strategic partnership with inKind, a hospitality payments and loyalty network with over 4,750 U.S. venues, to make Dogecoin the first cryptocurrency accepted across inKind’s network. Doge’s integration with inKind is intended, if finalized, to generate transaction volume of Dogecoin and recurring revenue via merchant payment processing fees, like how Visa or Mastercard earn interchange revenue.
Embedding Dogecoin into inKind’s hospitality platform would create thousands of new transaction touchpoints where Dogecoin may be used for payments, rewards, or redemption. As tokens move into real-world commerce, companies integrating them, whether gaming platforms or restaurant networks, may inherit operational and compliance responsibilities that previously sat only with exchanges and financial institutions.
Discussion
Thus, D&O underwriters may want to note how the intersection of corporate crypto use and proliferating crypto fraud (like pig-butchering) can create direct oversight risk and secondary liability risk for directors and officers. For directors and officers, the risk may lie in the adequacy of corporate oversight once tokens are integrated into business operations. Evolving regulation may require implementation of controls traditionally associated with banks and fintechs, including blockchain analytics, transaction monitoring, geolocation screening, and wallet-risk scoring. If a company’s token ecosystem inadvertently processes funds tied to a scam that is later exposed by law enforcement, regulators may question whether leadership exercised reasonable oversight.
Thus, Company boards and leadership, particularly of organizations that may be integrating the utility of crypto tokens, may be held liable for failing to have robust AML and KYT systems in place. If a company’s token operations, wallets, or payment rails inadvertently process tainted crypto linked to such scams, regulators could allege failure of oversight, resulting in a Caremark-type claim.
In addition, consumer plaintiffs could argue that companies accepted fraudulent tokens, ignored obvious “red flags” of suspicious transaction activity, similar to the theory asserted against East West Bank and Cathay Bank. A company integrating crypto tokens as part of payments, rewards, or treasury could face claims that it enabled or negligently ignored fraudulent flows if bad actors begin to transact through its network. Side A may still provide coverage for directors and officers liable for claims that they “should have known” that its crypto services or tokens were being misused.
Finally, public companies holding or transacting in crypto, which may include the creation of a crypto treasury and reward tokens, may want to anticipate investor and regulatory scrutiny over source-of-funds, counterparty vetting, and disclosure of exposure to illicit finance. If regulators reveal that a company’s token ecosystem processed flows traceable to pig-butchering schemes, and that revelation is made public, directors could face securities-disclosure suits for failing to warn investors of the risk.
As crypto continues to move into mainstream business operations, directors may face new liability if their company’s token activity, even indirectly, enables fraud, mishandles tainted assets, or fails to disclose that risk.
The views expressed in this article are exclusively those of the author, and all of the content in this article has been created solely in the author’s individual capacity. This article is not affiliated with the author’s company, colleagues, or clients. The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any subject matter.