A mysterious ghost in a green-glowing deep-sea diving suit lead the kids to a local fisherman who explains the ghost is Captain Butler, whose ship sank when struck by another ship. The Captain's wife is a witch who has conjured him back from the dead, and the captain is now doing a ghostly job of stealing ships. When the kids go searching underwater in the graveyard of ships, they find that the good captain is in fact alive, and after stealing the ships using a hidden cave inside the village cove to repaint and sell the stolen boats.