After settling in at the lighthouse, the children meet an elderly retired sailor, Jeremiah Boogle, who tells them of his youthful encounters with three villains who lured ships to Demon's Rocks and plundered the wrecks. He says the ringleader, One-Ear Bill, hid a treasure trove which has never been found. Two of One-Ear Bill's descendants, Jacob and Ebenezer, now show tourists through the wreckers' cave. Jacob burgles some items from the lighthouse and also steals the key. When the children visit the cave, Mischief discovers a gold coin. Later, Ebenezer and Jacob lock the children in the lighthouse to prevent them from returning to the cave to hunt for the treasure, but Julian and Dick enter the cave network via a tunnel and discover the treasure. Unable to reach the mainland because of the rising tide, they return to the lighthouse, light its lamp and ring an old warning bell amid a fierce gale to alert the villagers to their fate. Jacob and Ebenezer flee, and the children are rescued the next morning. Julian and Dick declare they will recover the treasure for the police and then the children will return to Kirrin Cottage.
