Talk to Jogodin, in the weapon shop of Altaruk, and insult him. Then talk to Aristuff, the captain leader (he is always wandering in the town). He will ask you a favor: Find his lost necklace. Don't talk about the merchant, or I noticed you will not be able to find the necklace!

Take boat to Balic, enter Pirate's Cove and talk to Dorian the Pirate leader. Ask him if he has a necklace, and as he doesn't seem willing to give it to you, just be more "persuasive". He will soon drop the necklace on the ground. As you are here, you can also attack Cygnus, they are the only two guys who can be killed in the Cove. After that, all the NPCs of the Cove will attack you if you come within range, but just flee as they are invincible. Don't worry, next time you come, they have just "forgotten" you!

Then head back to Altaruk and talk again to Aristuff. Say you have the necklace and... You have 0 XPs! So either I do something wrong or the necklace can be used somewhere else.

As you need to go to Pirates' Cove for this mission, you can also talk to Olina and trigger her own mission, you can do both of them at same time.