The adventurers found themselves in the midst of a desperate battle within the Cragmaw Hideout. Klarg, the bugbear leader, had seized Erik by the hair, but with Nissa's help, Erik broke free. The party swiftly dispatched the remaining goblin and wolf, cornering Klarg as he attempted to flee down a refuse chute, only to get stuck. Seeing no escape, the bugbear surrendered.
After tying up Klarg, the party interrogated him. He revealed he worked for King Grol, who had taken Gundren Rockseeker to a castle at the behest of a mysterious figure known as "the Spider." A search of Klarg's quarters yielded two healing potions, which were used to revive the unconscious Erik, and a jade frog statuette that Clara claimed. They also found several crates marked with a blue lion, which Klarg admitted were stolen from a caravan. The party then forced Klarg to carry the crates out of the cave. Once outside, after a brief debate, they allowed the goblin Shoxta to execute Klarg in revenge for eating his friend.
The group, now accompanied by Sildar and Shoxta, set off towards Phandalin. They camped for the night, during which Erik comforted a nightmare-plagued Clara. During her watch, Nissa was approached by a fox that transformed into an elderly druid named Reidoth. Reidoth warned of future dangers and gifted Nissa a small, petrified wood idol. When Nissa focused on her spirit animal, the idol transformed into a carving of a Bengal tiger, allowing her to summon a magical tiger companion she named Jasper. Reidoth also calmed Clara, who had woken in a panic, before disappearing back into the woods as a badger.
On the road, Sildar shared more information. He was a retired member of the Griffin Cavalry of Waterdeep and part of the Lords' Alliance. He was in Phandalin to find his friend, a wizard named Iarno Albrek, who had gone missing after being sent to establish a police force. Sildar also confirmed that Gundren was taken to Cragmaw Castle at the order of "the Spider." Upon arriving at the outskirts of Phandalin, the party was accosted by four thugs in red bandanas calling themselves the Redbrands, who demanded a toll. A fight quickly broke out. Bjorn decapitated their leader, Nissa and Jasper took down another, and the remaining two fled in terror.
The party proceeded into town, first delivering their original cargo to Barthen's Provisions and collecting their payment. They then took the stolen crates to the Lionshield Coster, where the proprietor, Linene Graywind, rewarded them and mentioned the Redbrands were a serious problem. The townmaster, Harbin Wester, also emerged, offering a bounty for dealing with orcs at Wyvern Tor and confirming Iarno Albrek never officially arrived in town. Sildar recalled that Iarno had been interested in the ruined Tresendar Manor on the hill.
Deciding the manor was the best place to start, the party investigated the ruins. They discovered a well-traveled path leading to a cleverly hidden cellar door beneath a pile of rubble. Inside, they found a lit, furnished cellar. They explored a dusty hallway where Breith fell into a hidden 20-foot pit. After helping him out, they proceeded to a door adorned with a mournful angel. Opening it revealed a crypt containing three sarcophagi and six skeletons in rusty mail, which immediately animated and attacked.
The adventurers fought fiercely, with Erik discovering the skeletons were vulnerable to his crushing maul. After defeating the skeletons, they heard noise from an adjoining room. A Redbrand burst through the door, but was quickly dispatched by Nissa and Jasper. The party pushed into the next room, a jail, where they found two more bandits guarding cells. Inside the cells were a woman, her daughter, and her son. The party defeated the bandits, capturing one, and freed the family. The mother, Mirna Dendrar, revealed her husband had also been taken and offered a reward for his rescue, while the captured Redbrand spoke of a boss named Glasstaff and a mysterious, brain-tickling creature deeper within the hideout.