The USS Alexander Hamilton (Cdr. A.G. Hall, USCG) escorted convoy HX-170 from 15 until 24 January and was then on the way to Iceland. One day earlier the store ship USS Yukon (AF 9) suffered an engine failure while on route to convoy ON-57 and was floating helpless in the sea. The cutter arrived on 25 January and took the ship in tow, while the US destroyer USS Gwin escorted the little convoy toward Reykjavik.

By noon on the 29 January, this convoy was only ten miles from their destination and the British rescue tug Frisky was ready to take the store ship in tow. When they were eight miles off Skaggi Point light, near the entrance to the swept channel to Reykjavik, the USS Alexander Hamilton cast the tow line and proceeded slowly ahead. At 16.10 hours, the German submarine U-132, which was patrolling off Reykjavik since eight days, fired a spread of four torpedoes at the little convoy, one of them struck the cutter amidships and destroyed all engines, including the emergency diesel generators, so no heat, steam, nor electricity remained. The other torpedoes missed their targets.

At 16.45 hours, the ship was abandoned, the survivors were picked up by Icelandic fishing trawlers and were taken to Reykjavik. The British rescue tugs HMRT Restive and HMRT Frisky and the US Coast Guard tug USS Redwing tried two times to salvage the USS Alexander Hamilton, but without success in the heavy seas. The US destroyers USS Ericsson , USS Livermore and the US seaplane tender USS Belknap screened the salvage operation.

At 13.15 hours on 30 January, HMRT Frisky took the ship in tow, but at 20.28 hours she suddenly capsized. The USS Ericsson then fired three rounds into the hull and left. As the cutter was reported still afloat in the evening, the destroyer returned to the scene, but found only an oil slick.

Hit by U-boat
Sunk on 29 Jan 1942 by U-132 (Vogelsang).