At 11.36 hours on 1 May 1942 the unescorted La Paz was hit by one of two torpedoes from U-109 in shallow waters about 10 miles southeast of Cape Canaveral. 42 crew members abandoned ship in three lifeboats, while the master and 14 crew members remained on board to save the ship. The ship had been missed by a first torpedo at 11.01 hours.
Bleichrodt observed how the ship sank by the stern until it rested on the bottom with the bow out of the water and heard another detonation one minute later, thinking that the second torpedo had hit a ship of a tug convoy, which had been spotted earlier further inshore, but apparently the torpedo exploded as it hit the shore. He claimed the sinking of the Nicaraguan motor merchant Worden (555 grt), identified by an intercepted radio message, but the vessel only reported the distress of the La Paz and took the damaged ship in tow. With the help of some shrimp cutters, she was subsequently beached with the forward section in a distance of about seven miles in 28°19N/80°33´30W.

The La Paz was salvaged together with the cargo after being sold to US agents and passed to the US War Shipping Administration (WSA). She was towed to Jacksonville, repaired and returned to service on 7 Oct 1942 as ship of the US Maritime Commission.