So yes, it was a carbon ring leak. A pretty big one too since it totally flooded the engine compartment over the course of less than 12 hours.
Irwin's fixed it all for free. There was no damage to the electronics. The oil did get contaminated with water so they had to flush the oil a couple times.
It seems to run fine and I already have a 3 year extended warranty as part of the sea doo summer incentives.
The carbon ring is part of the coupling between the engine and the jet drive. I don't believe it's a routine maintenance item and in this case it was a new machine with only 5 hours on it anyway. There are a few complaints about leaking carbon rings on new machines on the internet.
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