Fenton Hardy, the famous private detective and father of the Hardy Boys, asks his sons to help him with his latest case involving a criminal named Felix Snattman and the illegal drug trade smuggling of stolen drugs. Hardy directs Frank and Joe to a house on the cliff, whose location overlooking Barmet Bay offers an excellent vantage point to watch for smugglers.
The Hardys are tricked into the house by cries for help, and are trapped for a short time in the attic; meanwhile, their telescope and motorcycles are damaged, possibly by the smugglers. They observe a man boating on Barmet Bay being chased by another motorboat. After his boat explodes in flames, Biff and Joe swim out while Frank and Chet get a rowboat to rescue the man. Once brought to shore, the man regains consciousness and says his name is Mr. Jones, which the Hardys believe to be a thinly-disguised alias.
The next day, both Mr. Hardy and Mr. Jones disappear. Frank and Joe seek out Mr. Hardy's informant at the maritime docks, Pretzel Pete, to see if he knows anything about the smugglers. Frank and Joe revisit the Shore Road area, and inside the house not far from the house on the cliff, Frank sees Mr. Hardy's hat. With their friends Chet Morton, Biff Hooper and Tony Prito, they use a boat to search for a secret tunnel at the base of the cliff. Frank and Joe try to rescue Mr. Hardy but they are also captured at gunpoint. Chet and Tony go to the United States Coast Guard and find Biff Hooper, Jerry Gilroy, and Phil Cohen there and lead them to the smuggler's secret cave.