At 08.19 hours on 11 Dec, 1939, the neutral Garoufalia was hit by one torpedo from U-38, while proceeding inside the Norwegian territorial waters. The torpedo struck in the engine room and killed the crew on watch below. She was sunk with a second torpedo 30 minutes after the first. The survivors, among them two Norwegian pilots, were picked up by the Norwegian steam merchant Tellus. They had observed the U-boat before the attack and this proved to both British and Norwegian authorities that German U-boats operated inside Norwegian territorial waters. This was a huge propaganda blunder for the Germans and they did not send other U-boats on such patrols. U-38 operated as far east as Murmansk and Liebe disregarded all respect of neutral shipping or warning before attack. But most torpedoes failed or missed.