As Section III, “The Madness from the Sea,” opens, Thurston explains that he was in New Jersey visiting a friend when he caught sight of a news clipping from the Sydney Bulletin that depicted a statue almost identical to Legrasse’s. He includes the content of the article in his account, and it tells the story of a freight ship, the Vigilant, and a beaten-up New Zealand yacht, the Alert. These ships arrive in Sydney with one survivor, Gustaf Johansen, one dead man, and one eerie statuette found aboard the Alert. Johansen reports that his ship, the Emma, was put off course by a storm when it encountered the Alert. After refusing to heed the Alert’s warning to turn back, its crew began to fire upon the Emma until it started sinking. The crew of the Emma managed to climb aboard the enemy ship and kill their attackers before sailing onward. They came upon an unidentifiable island where six of the Emma's crew died, and when Johansen attempted to navigate the Alert back to the mainland, his lone companion also died.

Reading this story raises even more questions for Thurston about the Cthulhu cult and the power that it has both on land and at sea, especially considering that the dates of Johansen’s experience align almost perfectly with the dates in Professor Angell’s notes. Thurston decides to travel to Dunedin, the city of the Alert’s origin. He gathers very little information about the cult there, but he learns that Johansen moved to Norway after the incident. After examining the statue found aboard the Alert and growing even more disturbed, Thurston vows to visit Johansen in Oslo. His wife answers the door when he eventually arrives and reveals that Johansen died under strange circumstances after his return from sea, leaving behind nothing except a document he wrote in English to prevent her from reading it. Thurston convinces Johansen’s widow to give him this final manuscript, and he discovers that it tells the story of his horrifying encounter with “the city and the Thing.”

Johansen’s writings closely follow the testimony provided in the Sydney Bulletin article, but he goes into more detail about the abominable nature of those aboard the Alert. After Johansen and his crew finally kill them and take control of the ship, they come upon a stone monolith rising out of the sea and eventually discover R’lyeh, “the nightmare corpse city.” Cthulhu and his demons lie sleeping among green ooze, and Johansen expresses fear and horror about all that may exist beneath the water’s surface. He can only describe the city in vague terms as it defies the structuring principles of mankind’s world. The crew trembles with fear as they step foot on this otherworldly island to explore, and they watch in awe as a man named Donovan pushes open a large door to reveal a dark, cavernous portal. With a foul smell and a slopping sound, Cthulhu emerges and begins attacking the crew. Only Johansen and another man, Briden, manage to escape the island on the Alert, but Cthulhu descends into the ocean and begins following them. To stop this pursuit, Johansen turns the ship around and uses it to strike the monster, causing it to sink.

Johansen ends his story by emphasizing that no one, not even his wife, must know about the terrifying events that transpired during his voyage. Thurston, placing Johansen’s manuscript in a box alongside Wilcox’s bas-relief and Professor Angell’s papers, reiterates this sentiment. He believes that he will soon die as Johansen and Professor Angell did because he knows too much about the horrors that the universe possesses. Cthulhu still lives, and Thurston prays that no one else will learn of it.