[asdff]

There's islands out there (canaries, azores). My guess is a big tsunami event happened, washed out some town, survivors show up in ports around the med saying the place has sunk because that's a pretty good descriptor of a tsunami for ancient people, and the legend goes from there.

[8bitsrule]

The melting of the icecap raised the oceans worldwide by 400 feet. Sometimes very quickly (as meltwater lakes broke through barriers). (OTOH, tsunamis go away.)