A gang of smugglers are running contraband (brandy, silk and such) on the ship Sea Ghost to a sleepy coastal area from where it can be distributed to a wider market. They have chosen an old house, locally reputed to be haunted, on the cliff near the small fishing town of Saltmarsh as their landing-point for they can obtain easy and secret access to the cellars without attracting local attention via a sea cave. To further cover their activities, they have taken steps to encourage the sinister reputation of the house and the leader of the shore-based part of the gang, being an illusionist, has used his spell powers to make
the house a frightening place to visit, so the locals shun it completely. One of the 'receivers' of the contraband is a prominent merchant in Saltmarsh.