In February 1698, an Indian-owned ship, The Quedah Merchant, was spotted. Kidd and his crew attacked: the prize yielded money plus a cargo of silk, muslins, calico, sugar, opium, iron and saltpeter which could be sold at the nearest port for a rumored 7,000 pounds. Best of all she had French papers which made her a legal target for Kidd under his privateer commission. The Quedah Merchant was not just any cargo ship. It belonged to Muklis Khan, an influential and highly placed member in one of the eastern kingdoms, and he demanded that the East India Company make restitution. Kidd would be made to pay.

Kidd got wind of this and abandoned the damaged Adventure Galley, transferred the Quedah Merchant treasure to a small sloop, and ran for New York where he thought his patron Governor Bellamont could help him. Outside New York, Kidd buried the bulk of the treasure on Gardiner's Island (one of the few verified instances of a pirate actually burying a treasure) and attempted to use it as a bargaining chip for a pardon. It didn't work. Kidd was arrested and imprisoned and the treasure recovered. Despite his protests that he was only a privateer, Kidd was tried in London and executed in 1701. The papers that might have proved his innocence disappeared in Bellamont's possession and his logbook was burned. His corpse was displayed in an iron cage on the dock at Thames Estuary for several years as a warning to other would-be pirates.