The sun rises, and new facts are brought into light. Jacob, the hobo wizard, spends the night at werewolf Akina's book store, researching fairies and making some cold iron dust. The next morning, he brings his friend Chong with him to talk to the Keeper about the murder of Jenny Denny. Jenny's body is buried in Lakeview Cemetery, but her spirit was consumed somehow, so no ghost. They go see the changeling Cyphus to talk to Selise, his Sidhe date from the previous night. Selise gives them some information about Chin Xi in exchange for allowing one of her butterflies accompany him "so she can watch."
The group meets up at Akina's bookstore Blocked Mouth Books with 2 new faces: Chong and Ellethwen, the latter a Changling Hairdresser that poor cursed Steven convinced to come with him so he could introduce her to interesting potential clients. The group decides that meeting Chin Xi (see episode 1) on her turf is a bad idea, so they arrange to meet her on the observatory at Pike's Place. Steven takes an extra precaution and calls up the Triad's rival, George Tekkai.
Chin Xi meets the group, alone and unarmed. She persuades the group to follow her the original meeting spot (how did she do that?) at Seattle's Triad HQ. They go into an old-fashioned hole-in-the-wall chinese restaurant. Inside the back is a pocket dimension with several doors, several thugs, and a dragon skull. Chin Xi explains that her fairy godfather, a winter Fae, resides in her Father's skull. Selise indicated that Chin Xi was human, but apparently her father was a dragon.
Her godfather, Old Xi, tells the group that he killed Jenny Denny because she was dabbling in dark powers that she ought not to. He also indicated that Chin Xi needed to use the sword for a purpose it was never intended for. Chong questions what other purpose a sword could be used for then as a weapon. Old Xi then demonstrates how a sheathed sword can function as a hat rack.
Ellethwen, the changeling hairdresser, sees through Chin Xi's cool facade, and the Triad leader is forced to make a concession. She desperately need the sword to make her dream of Utopia a reality, but she also needs the group on her side. So she makes them an offer: question a warlock about her plans as a neutral party and then decide what to do from there. They can even keep the sword until they decide (the magic sword from episode 1).
The group starts out towards the Underground to find the warlock, but the butterfly is still following them. So are some well-dressed thugs from Chinatown. The group ducks into an alleyway to deal with the issues, but things go wrong. The thugs decide to jump them, the butterfly turns into a summer ogre, and a pack of Shen demons are summoned into the alley.
Akina goes wolf to frighten the thugs. Ellethwen picks one up and throws him into another thug (always tip your hair stylists). Molly kills the one that got thrown, and the others run for their lives. The ogre is not so easy, and it takes the group a joined effort before it is ripped in half. The Shen demons are too cute to cross at first, being little chimps with purple fur and wings, to deal with. This gives them time to form together into the big kong version of themselves.
The flaming poo hurts a lot of people, but the group eventually figures out that they can maneuver the demon over the running water in the sewer. They also figure out (by using the sword) that the weapon they carry is a 'good' sword made by Masamune (a sword that can cut anything, but does not cut everything).
The demon is reduced to "Little Wing," a tiny little monkey version that fits into a coffee cup. Molly stays behind to let the police clean up, and the rest of the group gets a cheap hotel room to question the demon.
Thanks to one of Jacob's wards, designed to hurt the demon if it lies, the group learns a few things. The demon was summoned by George. Steven apologizes for involving him, or as much as he can. His arm was lost in the fight, and he will need to find a way to reattach it. The demon also reveals that George considers Molly, Steven, and Jacob the most dangerous of the group.
Armed with knowledge, but still needing more answers, the group splits up to check their own sources out. They plan to meet back at the Underground to visit the warlock. There is also rumor and talk of paying George a visit, though not on such friendly terms.
