Gas hydrates are frozen methane gas that forms at appropriate pressure and temperature conditions. They are found in the marine sediments along continental margins worldwide. They have the economic potential of being tapped as a fuel source and also have the potential as a "greenhouse" agent after being freed into the atmosphere. In seismic sections, the occurrence of the base of gas hydrates, in some areas is often marked by a bright amplitude reflection. Such reflections follow the sea floor topography and are called bottom-simulating reflectors (BSR). The BSRs have negative polarity with respect to the sea-floor reflection and, in a common shot or a CDP gather, the amplitude increases with offset. The negative impedance contrast causing BSRs may be due to negative velocity contrast between hydrated sediments and normal sediment below or due to the presence of free gas at the base of the hydrates. In this paper, we carry out a prestack seismic waveform inversion of multichannel seismic data collected in the offshore of South Carolina to investigate the origin of the BSRs. We apply a multistage seismic waveform inversion for this purpose. A nonlinear optimization method is applied to estimate the low-frequency component of the velocity, whereas an amplitude-variation-with-offset inversion is applied to determine high-frequency components of the velocity field. Our detailed seismic wave-form inversion along the seismic line results in at least three low-velocity zones where the velocity is well below the velocity of the normal sediments. Such low-velocity zones correlate very well with negative fluid factors indicating the presence of free gas. Thus we conclude that the BSR is caused by free gas at the base of the hydrates in this region. We identify at least two other layers of free gas beneath the hydrates. The thickness of each of these layers is below the resolution of the source wavelet. Our results confirm similar findings reported from Ocean Drilling Program drilling and vertical-seismic-profiling analysis in the same general area.