Children of Dragons Blood
Xak Tsaroth was a very wealthy trading city founded by Solamnics that was destroyed during the Cataclysm. Thrown over the side of a cliff, it hung down inside of a ravine and was forgotten by the rest of the civilized world. Gully dwarves later began to inhabit the fallen city under the rulership of the Bulp clan, alongside the Glups and the Sluds. During the War of the Lance, it became inhabited by the Draconian forces under Highlord Verminaard, and was the lair of a black dragon Onyx (also known as Khisanth).
The ruins were utterly destroyed when Yäel) killed the dragon with the Blue Crystal Staff of Mishakal, and its resulting thrashings caused the city to collapse and Newsea claimed it.