In 1757, Moonfleet is a small village near the sea in the south of England. It gets its name from a formerly prominent local family, the Mohunes, whose coat of arms includes a symbol shaped like a capital 'Y'. John Trenchard is an orphan who lives with his aunt, Miss Arnold. Village legend tells of the notorious Colonel John "Blackbeard" Mohune who is buried in the family crypt under the church. He is reputed to have stolen a diamond from King Charles I and hidden it. His ghost is said to wander at night looking for it and the mysterious lights in the churchyard are attributed to his activities. One Sunday, while attending the service at church, John hears strange sounds from the crypt below. He thinks it is the sound of the coffins of the Mohune family. The next day, he finds Elzevir and Ratsey against the south wall of the church. They claim to be checking for damage from the storm, but John suspects they are searching for Blackbeard's ghost.

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