At nearly 13, Lemony Snicket graduates from a mysterious spy program and begins his internship. Following instructions from his new chaperone, S. Theodora Markson, he sneaks out a teashop window and meets her. Markson, wild-haired and testy, drives them out of the city in her battered roadster. They intend to work in Stain’d-by-the-Sea, a small town once entirely underwater that now survives by extracting and selling octopus ink.
Snicket and Markson meet with their client, an elderly woman named Mrs. Murphy Sallis, at her mansion. She tells them someone has stolen a precious statue and makes the duo promise to return it to its rightful owner. The figurine depicts a mythical creature of town lore called the Bombinating Beast, which bears characteristics of a sea horse, a hawk and a chicken. Mrs. Sallis claims a family named Mallahan, who lives in a lighthouse up the road, has taken the statue.
At the lighthouse, Snicket meets a girl with a typewriter named Moxie Mallahan. Moxie’s parents, both former reporters, ran the local paper. She says it’s in her blood to carry on the journalistic tradition. She shows him the statue he’s looking for, along with numerous other Bombinating Beast items that have long been in her family.
As Markson continues to develop outlandish theories about how the Mallahans stole the statue, Snicket begins to wonder if there’s much truth to Mrs. Sallis’ story. As he investigates, he meets a handful of quirky and interesting locals including the young, leather-clad town librarian, two children who drive their father’s taxi for tips, a married police officer team and a mysterious girl named Ellington, who begs him to help her find her father.
Moxie helps Snicket acquire the Bombinating Beast, which changes hands several times before the close of the story. Moxie and Snicket find Mrs. Sallis tied up and nearly drowned in the mansion basement. Moxie recognizes she isn’t Mrs. Sallis, and they learn she’s a local actress posing as the wealthy woman.
Through Snicket’s investigation, he learns of a villain named Hangfire who seems to be behind the Sallis fiasco and Ellington’s father’s disappearance. Hangfire is skilled at fooling his victims by imitating others’ voices, and for reasons unknown to Snicket, he is after the Bombinating Beast statue. The book ends with Snicket pondering even more questions than he started with, paving the way for the next book in the “All the Wrong Questions” series.