The crew of Australian super maxi Skandia took to life rafts and rival New Zealand yacht Konica Minolta was also forced out of the Sydney-Hobart race in rough weather that has claimed almost half the fleet.
Konica Minolta and Skandia had led the annual 630-nautical mile bluewater classic since Sunday's start but both suffered serious damage in Bass Strait between the Australian mainland and the southern island state of Tasmania.
Meteorologists issued a gale warning for eastern Tasmania on Tuesday and 53 boats out of a starting fleeting of 116 had been forced out by late afternoon on Tuesday.
Race officials said another 11 were sheltering in ports as thunderstorms, southwesterly winds with squalls up to 50 knots and freezing conditions buffeted the fleet.
New Australian maxi Nicorette grabbed the race lead after the withdrawal of the two favourites.
Stewart Thwaites's Konica Minolta had gradually increased its lead over 2003 winner Skandia but suffered serious keel and cabin damage as it bounced down the back of a big wave on Tuesday.
"We barrelled off the top of a ginormous wave and crashed down the other side," Thwaites told race officials.
"It was all hands on deck. The wave was twice as big as any others we've seen during this race. It was a pretty hairy night overall," he said after reaching the Tasmanian coast.
DISTRESS CALL
Skandia owner Grant Wharington issued a distress call several hours earlier when an hydraulic arm on its sophisticated moving keel became jammed and the boat was unable to hold a course.
The yacht, which had hit a giant sunfish on Monday, wallowed helplessly in seas of up to seven metres (23 feet).
Skandia's 16 crew took to life rafts and were safely transferred to a Tasmanian police launch, race officials said.
"Obviously the safety of our crew is the most important thing," Wharington said.
Late on Tuesday, Skandia's keel snapped off and the multi-million dollar boat capsized. Attempts would be made to tow the boat to shore on Wednesday, officials said.
Since Sunday's start, the two state-of-the-art 30 metre (98 feet) super maxis had been engaged in a re-run of last year's gripping race, which Skandia won by 14 minutes over Konica Minolta, then known as Zana, after more than two days at sea.
CREW SAFE
Former America's Cup sailor Syd Fischer's Farr-50 Ragamuffin was dismasted and also withdrew on Tuesday.
Fischer, who was sailing in his 35th Sydney-Hobart, reported that all his crew were safe.
Ludde Ingvall's A$5 million Nicorette led with about 80 miles to go by 0930 GMT on Tuesday and was expected to finish early on Wednesday morning local time.
"We are trying to take it easy and not break anything," Ingvall told race officials.
Nicorette was about 45 miles clear of Australian downwind flyer AAPT, with seasoned Australian maxi Brindabella third.
While conditions were difficult, they were not as bad as those during the 1998 race when six sailors died and five boats sank after 80-knot winds and mountainous seas hammered the fleet.
