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Background
Constable Aidan (#1) will give you this quest when you enter
Amaranthine. If you pursue the quest, then you won't be allowed to complete the quest
Smuggler's Run for the smugglers.
Walkthrough
Constable Aidan will tell you that a smuggler (called a "suspicious character") is doing business in the market (#2), and he'll ask you to question the man to learn where the smugglers' hideout is located. When you talk to the smuggler, he'll recognize that you're working for the authorities, and he'll run away. At the same time, a group of hired goons will attack you. To advance the quest, you'll need to follow the smuggler and fight some more groups of goons (#3). Eventually, the smuggler will tire of the chase, and he'll flee into an abandoned house (#4).
When you tell Constable Aidan about the chase, he'll realize that the abandoned house must hold the entrance to the smugglers' hideout, and he'll ask you to go back there and find a way inside. When you return to the abandoned house, you'll find a shady character there, and killing him will reward you with the
Smugglers' Key, which will allow you to enter the hideout through a trapdoor in the house.
Inside the hideout (the "smuggler's cove"), you'll encounter the "red" smuggler leader, plus some other smugglers, and they'll all attack you. This battle should not be particularly tough to win. Afterwards, when you return to Constable Aidan to let him know that the smugglers have been dealt with, he'll reward you with 10 sovereigns and 750 xp. "The city of Amaranthine owes you a great debt."
Note: If you loot all of the containers in the hideout, then you'll also receive a
Toy Chariot,
Locksmith's Tools,
Dispel Trap Plans,
Feet of the Nimble,
Trickster's Gloves, and more.
1 - Constable Aidan
2 - Suspicious Character
3 - Goon Fights
4 - Abandoned House