After a night of rest at their new headquarters in Vallaki the party went to the Blue Water Inn. There they met with Ismark, exhausted after his fruitless search for any sign of his missing sister. He explained that he was going to return to his home village of Barovia and assume his role as the new burgomaster. He begged that the party would continue the search for Ireena, to any length and any cost. He then resumed his rest and encouraged the group to talk to Urwin and Danika, and perhaps the town guard, about following up on any possible leads.
Danika was tending to the bar area when the party emerged from Ismark's room. She relayed a tale of suspicious behavior concerning one of her regular patrons, Bluto Kargarov. The previous day he had been seen carrying a length of rope and a large sack, and seemed evasive when asked about what he was doing with them. He hasn't been seen since Ireena's disappearance.
After talking with Danika the party went to speak with the town guard about anything out of place they may have seen. Guards stationed at the West Gate reported a strange group of self-described pilgrims arriving just as the last traces of daylight dwindled away. Even with low hanging hoods to obscure their features the guards could see that the men had some kind of beastly deformities. Without a full appreciation exactly why, the guards opened the gates and welcomed them into the town. The same group of men were back at the West Gate several hours later, this time leaving Vallaki, and again the guards let them through without a second thought.
The party decided to follow up on Bluto first. The last time he was seen he was heading toward the North Gate, presumably to go fishing out on Lake Zarovich. Once the party arrived at the lake they could see several rowboats on the shore, and Bluto sitting motionless in a rowboat a few hundred feet from the shore.
The party started preparing to take two boats out onto the lake, but as soon as they stepped in the water Bluto stood, lifted a wriggling sack up from the bottom of the boat, tossed it overboard, and calmly sat back down, staring off into the distance the whole time.
The party scrambled to action, hurriedly rowing out to retrieve the trapped victim before the bag sank. They arrived just as the bag slipped beneath the water. Kahn dove in pulling the bag back up towards the surface. As he swam he could see a huge tentacled horror charging up from the lake's deepest depths.
The nightmarish creature lashed out with with its long barbed tentacles, but its most fearsome weapons was a savage psychic assault. It immediately became apparent that this creature must be the source behind Bluto's enthrallment. Try as it might, the party stood fast against the creature's telepathic probing. During one of the mental attacks one character was able to glimpse a part of the creature's mind.
The beast, called an aboleth by the sages, was an ancient creature from a time before the gods. They are memory incarnate, the sum accumulation of not only from their own immortal lives, but all the knowledge and experience of every creature they have devour.
The creature desired Vistani victims most of all, in the hopes of gleaning the secrets of navigating the mists and escaping Ravenloft. For generations the Vistani in the region have told cautionary tales urging them to give Lake Zarovich a wide berth. As a result, the aboleth has resorted to mentally coercing the town drunkard of Vallaki into herding fresh quarry.
After a fierce battle the party vanquished the beast and watched it sink back into the lake's depths. They immediately opened the sack to reveal a terrified and traumatized Vistani girl. The group brought the girl, named Arabelle, along with Bluto's unconscious body back to the lakeshore.
On the way back through Vallaki they stopped at Wachterhaus and turned Bluto in for his crimes. Lady Fiona vowed to give him the justice he deserved. With a few hours of sunlight remaining the party opted to rush Arabelle home to her encampment west of Vallaki without delay.