Sunken Ship is a location seen in Freddi Fish and the Case of the Missing Kelp Seeds. The Squidfather's goons use it as a hiding spot for the stolen kelp seeds.
In all versions of the game, the sunken ship is the final location that Freddi and Luther need to go to in order to find Grandma Grouper's Kelp Treasure. Freddi and Luther automatically come here after obtaining the third bottle in any version of the game.
After Freddi and Luther manage to get inside the room where the treasure chest is, they struggle with lifting it up until they are confronted by Spongehead and Boss the Sharks, who had arrived after Spongehead finally remembered where the treasure was. Boss tells the kids to hand over the treasure, but Freddi refuses as the kelp seeds are meant to be shared to everyone. After the sharks reveal they are trying to help the Squidfather use the kelp seeds to grow kelp, Freddi suggests they all share the seeds together. The sharks like the idea and leave to tell the Squidfather about their new plan.
With that all resolved, Freddi and Luther leave with the kelp treasure while at the same time growing kelp around the sea.