Word in Sadrith Mora is that a brawl erupted between two parties of armed men over a runaway Argonian slave by the name of Sun-On-Shade. One party consisted mostly of westerners: Bretons, Redguards, and a Bosmer, accompanied by a Dunmer woman appearing to have been Morag Tong. The other party were thugs dressed in chitin armor, similar in make to the Morag Tong, armed with steel weapons and crossbows.
The outlanders survived, though nearly all of them were wounded. Among the thugs, all but two were killed. Sun-On-Shade, despite taking a crossbow bolt in the arm, manages to escape.
Townsfolk upon approaching the thug corpses would identify a few of the faces as being Camonna Tong, gangsters recently turned to kidnapping and enslavement of outlanders in part of their new leadership under Ulvan Dres. But what intrigued Sadrith Mora more however, were their arms... specifically the crossbows.
They appeared to have been made of yew wood, a tree commonly found in High Rock. The schematics match those of being used by the armies of the Daggerfall Covenant. Magisters inside Tel Naga speculate the reasons to the Camonna Tong wielding Covenant crossbows and Morag Tong armor. One magister speculated that they have turned to scavenging. Another considered if the Covenant were providing the thugs with both, hoping to start some sort of proxy war in Morrowind. But that lays more questions:
Why would the Covenant arm thugs with their arms? Why dress them as Morag Tong?
The magisters conclude that so long as whatever bloodshed that may happen do not boil over into Telvanni lands, this was not their business.