Sildar sets up a meeting with the townmaster, Harbin Weste. The heroes are disgusted to find Harbin to be a fat, coward of a man, unable to fight the Redbrand that terrorize his people. He is soon overthrown and Sildar takes up temporary office as the townmaster.
Sildar learns that his longtime friend and former member of the Lords' Alliance, Iarno Albrek, is missing. He was last seen exploring the area around Tresendar Manor about two months ago, shortly after arriving in Phandalin. Sildar asksed the trio to investigate the manor and the surrounding area to find and bring back larno - or what's left of him, if something killed him. Regardless of Iarno's fate, Sildar rewards the party with 200 gp for eliminating the Redbrand threat.
Opal questions Daran Edermath, the owner of Edermath Orchard. Despite immediately being flustered by his handsomeness and kind nature, Opal concentrated enough to find out that he knows that the Redbrand's hideout is under the ruins of Transcendor Manor. He also notes that the Redbrands hang around the Sleeping Giant tap house. In exchange for this information he tells Opal of the troubles surrounding Old Owl Well and wishes her to investigate it.
While investigating, the trio is attacked in the street by a small group of Redbrand outside the Sleeping Giant tap house. The group defeat each of them but not before learning that their mysterious leader, Glasstaff, wants them dead for interfering in his plans. This spurs each of them to hasten their mission.
The three eventually raid the ruins of Trascendor Manor, battling their way through onslaughts of Redbrands, until they find Gundren Rockseeker and set him free. As he escapes the group fight on and eventually come face to face with the leader of the Redbrand, Glasstaff, which turned out to be Iarno Albrek all along. The goblins began calling him glasstaff due to his crystal-like mage's staff. He reveals that he seized an opportunity in Phandalin to line his own pockets. Originally tasked with setting up a constabulary, the mage instead assembled a group of outlaws and local ruffians to secure his own position in town. He partnered with a man called The Black Spider in order to take the Gundren's discovery for himself.
Glasstaff was defeated, but kept alive. Sildar, saddened deeply by the betrayal, gave his former friend to the Lord's Alliance for punishment.
Glasstaff let it be known that he was in service to the Black Spider, a drow, searching Wave Echo Cave for the Forge of Spells. Gundren had discovered the location of the Forge of Spells and as such, was captured to take them there. His brother and cousin unfortunately did not survive their captivity.