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Roger "Verbal" Kint has a problem: a bunch of his fellow criminals died in a shoot-out, and he—and a badly burned Hungarian criminal—are the only survivors. (Yeah: we'd call that a problem.)
He's got some explaining to do, but he's a talkative dude (his other defining features are an impressive widow's peak, a limp, and a disabled arm). Fortunately, he's granted legal immunity, and can't be charged with any crimes. Unfortunately, U.S. Customs Special Agent David Kujan has just arrived in L.A., and he's determined to wring the truth out of Verbal.
As Kujan interrogates him, we see Verbal's story unfold: he and five other criminals in New York find themselves in a police lineup, ostensibly because they're suspected in a hi-jacking. One of the criminals is a dude named Dean Keaton—a sensitive soul trying to give up his criminal life (according to Verbal) and a ruthless murderer (according to Kujan).
To get back at the cops for hassling them, they decide to pull of a jewelry heist, stealing emeralds from a smuggler. It goes off without a hitch (no one dies), and they fly to L.A. to sell the jewels.
But their connection, Redfoot, wants them to go in on a new deal: robbing another jewel smuggler. Sounds simple.
But this time, they end up killing the guy they're robbing along with his two guards…and apparently they were actually hired to steal drugs, not jewels. They're not happy about this.
Turns out, they're being lured into a trap. Redfoot's working for a guy named Kobayashi, who represents a mysterious, master-criminal named Keyser Söze. Kobayashi forces them to go along with a plan to steal drugs for Keyser Söze, threatening to kill their family members if they don't.
They accept the deal, because that's just the kind of deal you have to accept.
They intercept the drug dealers on a boat—although it turns out that Söze really wanted them to kill a lot of the drug-dealers so he could apprehend a snitch who was trying to give info about Söze to a rival gang. Söze himself shows up and kills all of the criminals, tying up lose ends. Only Verbal and the burned Hungarian survivor live to tell their stories.
Only Kujan's not buying it. He says that Dean Keaton was actually behind the plot the whole time—Keaton was the closest thing to Keyser Söze. Oh yeah—Kujan asserts that Söze was actually just a myth.
Verbal breaks down crying, and says this is the truth: Keaton was behind it all. Case closed, right?
As Verbal walks out of the station, Kujan realizes that Verbal made up his whole story using details from the bulletin board in the office. (Kobayashi's name was just the brand on the bottom of a coffee mug, for example.)
The fax depicting a sketch of the Hungarian criminal's description of Keyser Söze arrives, and it looks just like Verbal. We see Verbal walking down the street, and his limp disappears along with the feigned damage to his arm: he was faking it.
We're left thinking that Verbal was the true Keyser Söze as a car stops and picks him up, leaving Kujan behind in desperation.