The party, now lacking Angus and Lady Halain, arrived in Phandalin as the sun was beginning to set. Sildar Hallwinter, who was now lacking several of his signature gold teeth, thanked them for their escort and ventured into town through a side entrance. Balmore, Maurice, and La'Thum trudged through Phandalin's main entrance. A group of fearsome-looking fellows, all of whom were wearing similar red cloaks and bandanas, stopped the group and demanded that they pay the "toll" to get into town. When Maurice attempted to sweet-talk his way out of paying, the men merely doubled his fine.
After paying, the party proceeded immediately to Barthen's Provisions. In the square outside the shop they came across a cleric named Tulinthel, who had once been the love interest of Dick. She explained her desire to build a temple to Pelor and, upon hearing that the party had travelled with Dick prior to his death, asked to join. The party then entered Barthen's Provisions, where they delivered the goods Gundren had entrusted to them and picked up some adventuring gear. Elmar Barthen expressed his concern that Gundren had gone missing so soon after discovering a map to the Wave Echo Cave, and informed the party that a group of bandits calling themselves Redbrands had overtaken the city. Maurice managed to swing a good deal on rope by emulating Elmar Barthen's Southern accent and correctly assuming the man's opinion of "darker folk."
The party regressed to a tavern, the Sleeping Giant, where Maurice and Tulinthel performed at the request of Sarah Slepperd, a dim but beautiful barmaid who developed an unrequited crush on Maurice. She paid the performers a little more than was thought acceptable for their performance, and allowed the entire party to stay in the rooms reserved for tavern workers. Balmore, who had been drinking steadily the entire evening, and La'Thum followed.
The party was awoken around dawn by the sound of a squabble outside; Halain had tried returning to the party, but was being accosted by several Redbrands. The party immediately leapt to her rescue and, after the fight, cautiously allowed her to rejoin.
In the morning, Maurice led the party to his aunt Quelline Alderleaf's house on the edge of town, where she took care of the party and assured them that they were welcome to stay any time. While the rest of the party ate, Tulinthel befriended Quelline's young son Carp, who revealed that he knew of a secret entrance to the Redbrand hideout.
Carp led the party over to a trapdoor in the woods, into which the party descended. They emerged in a subterranean cavern underneath Trescendar Manor. Tulinthel fell through a rigged bridge and came face-to-face with a telepathic creature that called itself a nothic. It kept saying it was hungry. Tulinthel told the party to pull both herself and the nothic up, and promised the nothic delicious goblins to eat. La'Thum led the party to a nearby door, knocked, and announced that they had been sent by the leader of the bandits, Glasstaff.
Upon being told to enter, the party came face to face with Glasstaff, who fired off a Charm Person at La'Thum, ordered the nothic to attack, then escaped the room using Misty Step. After a harrowing battle in which the nothic revealed that Balmore's long-lost love, Bethalda, was being kept in Cragmaw Castle, the party managed to defeat the monster.
While investigating Glasstaff's quarters, Maurice came across an ajar secret door and a letter from the Black Spider addressed to Iarno Albrek, telling him to capture or kill a susipisious group of "visitors to Phandalin" and to deliver and Dwarvish maps found in their possession.
The party then fought a group of Redbrands who had been playing dice and, at the suggestion of Tulinthel, donned the Redbrands' cloaks.