In the early seventeenth century, Basque whalers who had pioneered large-scale whaling in Newfoundland extended their expeditions to Iceland. In 1615, a year marked by severe ice conditions and heavy livestock losses in Iceland, three Basque whaling vessels arrived at Reykjarfjörður in the Westfjords during midsummer. The Icelanders and the Basque crews initially maintained a mutually beneficial arrangement. However, when the ships prepared to depart in late September, a severe gale destroyed all three vessels on the rocks. Most of the roughly 80 crew members survived the wreck.
Two of the captains, Pedro de Aguirre and Esteban de Telleria, wintered at Vatneyri in Patreksfjörður and departed for home the following year without further incident. The crew of a third ship, commanded by Captain Martín de Villafranca, split into groups that traveled to Ísafjarðardjúp, Bolungarvík, and Þingeyri.
Conflict arose after a group of Basque sailors entered an empty merchant's house at Þingeyri and took dried fish. In retaliation, on the night of 5 October 1615, a group of Icelanders attacked the hut where the Basques were sleeping, killing 14 of them; only one man, García, escaped. The bodies were mutilated and submerged in water. Contemporary writer Jón Guðmundsson the Learned recorded the killings as a dishonoring of the dead. Three days later, Ari Magnússon, the local sheriff, convened a council at Súðavík, where twelve judges declared the surviving Basques outlaws.
On 13 October 1615, a further 18 Basques were killed at Æðey and Sandeyri in Ísafjarðardjúp while fishing, by men under the command of Ari Magnússon. According to Jón Guðmundsson's account, the victims' bodies were mutilated. Captain Martín de Villafranca, whose family had a history in Newfoundland whaling, was wounded and attempted to escape by sea but was stoned in the water, dragged ashore, and killed. In total, an estimated 32 Basque whalers were killed across the two incidents, following verdicts issued by Ari Magnússon in October 1615 and January 1616 that invoked the Icelandic law book of 1281 to justify the killings.
Jón Guðmundsson the Learned later wrote a critical account, "A True Account of Spanish Men's Shipwrecks and Slayings," condemning the sheriff's decision and describing the killings as unjust; he stated he fled south to Snæfellsnes rather than take part in further attacks.
In April 2015, four hundred years after the massacre, a descendant of one victim, Xabier Irujo, together with Magnús Rafnsson — a descendant of one of the perpetrators — erected a memorial stele at Hólmavík. The ceremony was attended by regional officials from both Iceland and the Basque Country, and the Westfjords district commissioner formally revoked Ari Magnússon's 1615 decree.