Fireball!

Windows rattle as the roar of an explosion fills Trollskull Alley. Charred bodies and anguished screams fly through the air. A thick cloud of acrid smoke billows outward from the blast, which seems to have occurred right outside your door.

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People caught in the fireball:

One elderly female human

Two cloaked male humans clad in leather armor with sheathed longswords

Two female humans and one male half-elf dressed in plain clothes

One male gnome wearing a burned cloak and clutching a dagger

Two female halflings who were playing a flute and a fiddle, and two male halflings who were dancing

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Chippin Dale sprung into action, chasing after a fleeing person! Sadly, the fleeing person escaped.
After the guards arrived, the party stood around.
Grigor talked to Jezrynne Hornraven

"I tell you, it was not a man. More like a puppet shaped like a man. A puppet without strings. It was on the rooftop. It hurled something into the crowd below that caused the explosion. I saw those halflings burned alive! I saw them!"

Chippin Dale talked to Fala Lefaliir

"I was watering plants in the greenhouse on the second floor of my shop when the blast blew out some of the windows. Lucky I wasn't injured! Through the smoke, I saw a cloaked man take something from the body of a dead gnome, then start limping away. He was badly burned and casting glances over his shoulder, like he was afraid someone might be following him. He was headed toward the Bent Nail."

Hjoldrak Ebmyr talked to Martem Trec

"Right after the explosion, I ducked behind a rain barrel. Then I heard a 'plop' and found this in the barrel."

Hjoldrak Ebmyr took the necklace from Martem Trec. A guard saw this and reminded Hjorak of the fines involved in withholding evidence and impeding an investigation.