The attempt to take Quebec fell short (but just barely), so in June, 1776 Benedict Arnold began to withdraw south to the northen end of Lake Champlain. The British, led by General Guy Carelton was in hot pursuit, within musket range at one point. Arnold was the last to leave Canada: he rode to the water's edge, shot his horse so as to leave nothing of value for the British, then boarded the last boat for safety at Crown Point
Arnold surmised that the British plan was to control the 130+ mile long Lake Champlain. With Carleton coming from the north, and another army pushing north up the Hudson, New York state would effectively be cut in half - New England would be cut off from the rest of the colonies. Defeating Carleton might be too much to hope for, but if Lake Champlain could be denied Carelton before the weather turned, perhaps he would withdraw to Canada for the winter.
Arnold knew Carleton to be a cautious leader -- perhaps overly cautious. If Carleton could be made to think a major fleet awaited him, it might slow his preparations. So, carpenters and workmen from as far away as Boston and Rhode Island were hired to build "Admiral" Arnold's fleet of 20 ships.
The pace was frantic, so much so that "green" wood had to be used which caused the ships to leak almost immediately. Indian scouts reported the activity to Carleton, who himself began building more ships. As each of Arnold's ships were ready, their maiden trip would be to the north where they would fire off a round or two of cannon in a show of defiance. Sure enough, this caused Carleton to build more of his own ships, even going so far as to disassemble the 3 masted, 18 gun HMS Inflexible carry to Lake Champlain and reassemble it there.
By September, Arnold had 17 ships including his flagship Congress, the 54 foot Philadelphia and 7 more like her and a number of smaller boats, all armed with cannon. All were flat bottoms row galleys of Arnold's own design, but still would be no match for the 18 guns of the HMS Inflexible.
In October, the British began moving south with nearly 10,000 men including British regulars, Canadians, Germans and Iroquios Indians in some 640 flatboats and canoes trailing the Man-o-War. Arnold knew they stood no chance against the Inflexible, so he moved his fleet into the mouth of Valcour Bay.
On October 10th, the British sailed by without seeing it. Arnold let the Inflexible and 2 schooners pass , then opened fire on the smaller boats. They sunk and crippled several ships right off, including one that exploded when an open magazine took a direct hit. The large British lead ships were unable to turn into the tricky winds and were unable to return for for sometime.
The British were suprised but were better trained in naval tactics - some reports have Arnold rushing from gun to gun sighting them for the inexperienced soldiers and militia now sailors. As the large British ships struggled to get into position the gunboats returned fire in a ferocious battle. Arnold's flagship Congress took several hits as did The New York, Philadephia and Jersey. On the Washington, a single officer was the only person still in action.
The battle started just after noon, but it wasnt until dusk that the Inflexible was able to get into position. Several of Arnold's ships concentrated fire on her and caused her to withdraw a bit. As dusk settled, the British bottled up the Armericans in the mouth of the bay with a blockade, content to finish off Arnold's Armada in the morning.
Arnold, as he often did, had other plans. During the night his ships slipped around the flank and rowed south. When the morning came, the bay was empty, but in the distance the American "navy" was rowing for its life.
The British pursued but it took the better part of 2 days to catch up. When they did, The Congress and The Washington held off the entire British fleet while the smaller ships escaped. When The Washington was finally crippled, Arnold had his men row into the wind thru the cardon where it would be difficult for the larger British ships to follow. The Congress and several smaller ships made a mad dash for the nearest shore. Arnold refused to strike his colors and had the Congress burned instead.
The Americans retreated to Fort Ticonderoga. When the British approached, cannon was fired to give the appearance it was well manned and well fortified. With his Indian allies warning of snow and rough water on the lake approaching, Carleton gave up the campaign and withdrew to Canada.
In spite of having built a small navy from scratch, then taking on the world naval superpower with row galleys and fight it to a draw, in terms of 18th Century warfare, Arnold didnt win. The British weren't defeated and it was the Armericans who retreated. He did however accomplish what he set out to do - preventing the 2 British Armies from linking up and cutting the colonies in two. In causing Carleton to withdraw, an entire year was bought giving the Continetals time to fortify and strengthen their hold on northern New York state.
The Continetal Congress didnt quite see it that way and Arnold received some criticism for the "failed" campaign. This was probably partly due to frustration at not a single clear American victory in all of 1776 (as yet), partly that many in Congress didn't like Arnold and partly that this "loss" was also on the heels of his failure to take Quebec.
In June 1997, the last ship unaccounted for -- The Spitfire -- was located.