When a ship goes down it leaves a giant column of air above it. Water then rushes in to fill in this column, dragging everything with it. The moving water is the fabled whirlpool effect.
This is also what causes tsunamis, but at a much larger scale. A plate drops (or rises), water is displaced and it forms a giant wave. Fortunately, ships can neither drop as fast as a tectonic plate, nor does it displace enough water, so sinking ships don’t cause tsunamis.
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