The Spanish city of Granada, located on the lake, was an important trading centre for much of its early history so it was a prime target for pirates such as Welshman Henry Morgan and freebooters like William Walker.

[citation needed] The pirates escaped with an estimated 500,000 sterling silver pounds before sailing up the Coco River where Morgan allied himself with the Miskito native Americans who participated in the sacking of several Spanish settlements in the area.

At one area southeast of Granada the Spanish Army Captain Fernando Francisco de Escobedo began building the Fortress of the Immaculate Conception in 1673 next to a rapid in the San Juan River.

The structure, made of stone, was completed in 1675 and it eventually became an important asset in keeping pirates out of the lake, even though it failed in its first test in 1685 when the English buccaneer William Dampier bypassed the fort by landing on Nicaragua's Pacific coast.

[2] Since the establishment of British colonies in the West Indies, most notably Jamaica, the constant conflict between Britain and Spain created a haven for pirates who also served as privateers in war time.

Initially Walker had been commissioned by the liberal government of President General Francisco Castellón to bring 300 men to aid in the war against the Legitimists, but his real intentions were to take over the country, as he had in Baja California and Sonora, Mexico.

Walker sailed from San Francisco in May 1855 with sixty men and when he arrived in Nicaragua his small army of filibusters was increased by about 300 Americans and locals, including the pirate Charles Frederick Henningsen.