At 23.58 hours on 16 May 1942 the unescorted and unarmed Ruth Lykes (Master Gosta M.C. Carlson) was hit amidships on the port side by a dud torpedo from U-103 that glanced off the ship, when steaming on a zigzag course at 10 knots off Cape Falso, Nicaragua. The U-boat then surfaced and began shelling the ship at 00.19 hours from a distance of 1.5 miles. After about 24 hits in the superstructure and rigging, the engines were stopped and the most of the eight officers, 21 crewmen and three passengers abandoned ship in two lifeboats, while several others jumped overboard and swam to a raft. The Germans ceased fire to let the crew time to abandon ship and then reopened fire at the vessel, which sank with a heavy list to port at 00.44 hours. The U-boat picked up one crewman who had injured himself by falling on wreckage as he jumped overboard. His wounds were treated and he was placed in a lifeboat after being questioned. When they were asked for bandages, Winter provided them four packages of bandages and cigarettes and stated: I am sorry, but you can thank Mr. Roosevelt for this.

Three officers and two crewmen were lost. The 27 survivors were picked up after twelve hours by the Norwegian motor merchant Somerville and landed them at Key West, Florida, but one crewman died from wounds on the vessel.