U-138 was sailing with secret orders, believed to be instructions to enter the Royal navy base at Gibraltar and attempt to torpedo the battle cruiser H.M.S. Renown. However the captain, Oberleutnant zur See Franz Gramitzky, had warned his men about the need for security in the event of capture and British intelligence was only able to piece together a part of the story. They did get a fairly good account of how she was sunk:
At dawn on 18th June, 1941, a man on watch saw a dark shape in the sector astern and to port; the shape came nearer, and all the look-outs strained to make out what was approaching. Suddenly the Germans decided that it was a cruiser and crash-dived.
The Captain ordered the crew to don their escape apparatus. As he spoke the U-Boat was at a depth of 40 metres (131 ft.) when three depth charges exploded very close and caused extensive damage; broken glass and pieces of wrecked gear seemed to be everywhere, and water came pouring in from a number of leaks; tools and spare parts were scattered by the explosions.
The oil consumption gauges were smashed, and the bursting of a bottle containing compressed air caused excess pressure inside the U-Boat. Neither the main pumps nor the hand pumps would work and water entered the exhaust, which had apparently been inadequately repaired at Bergen on the previous cruise. The port electric motor ceased to function, but the starboard electric motor was still running, and the lighting system did not fail.
According to prisoners the U-Boat sank on two occasions to a depth of about 210 m. (689 ft.). The presence of chlorine became increasingly oppressive. There were still 50 kg. of compressed air available. “U 138” rose to a depth of about 30 m. (98.4 ft.) and would have attempted to torpedo the “cruiser,” but for the fact that everything in the U-Boat was flooded, and the pumps could not be made to work; the U-Boat went down by the bow and then by the stern alternately as water rushed from one end of the boat to the other, but later the U-Boat went down markedly by the bow.
Prisoners stated that two further depth charges were dropped near “U 138.” The Germans considered that the batteries must have been almost exhausted by being run continuously in the effort to keep the submerged U-Boat horizontal, while more and more water entered.
After a period estimated by prisoners as anything from 30 minutes to one hour, “U 138” was obliged to surface, was fired on by the British, and the crew abandoned ship. When the conning tower hatch was opened, the Captain was ejected by the air pressure in the U-Boat.
The Germans complained that, after they were already swimming in the sea, the “cruiser,” which they now recognised as a destroyer, dropped further depth charges. Prisoners believed that the British had “wrongly” assumed that other U-Boat’s were present. The entire complement was picked up by H.M.S. “Faulknor.”