Location: The Hideaway (ship)
Petitioner: Goetz
Unlocked: Complete Things Fall Apart
Reward: Continental Censer, 1 Meteorite, 35 Renown
In order to unlock this side quest you need to more or less complete Things Fall Apart, a main story quest with three sub-quests attached. Once you've completed the three sub-quests and reported back to Otto at the Hideaway you can begin several side quests. You'll need to visit the Krzjit Echoes at least once to unlock the world map, a necessity for An Eye for an Eye.
The petitioner in this case is Goetz, and you'll find him on the Rear Stacks, just outside Blackthorne's forge. Ask him about the side quest and he'll tell Clive that he's worried for Charon. Rumor is that she's been selling to bandits, which is an un-Charon-like thing to hear. Speak to Charon in her usual booth to receive a proper tongue-lashing, then speak to Goetz again. He'll decide to get to the bottom of the rumors.
Jump to the Dalimil Inn and check in the southeast of the town, just north of the South Gate. Goetz is over here, speaking to someone, and the man will claim that a woman named Charon is selling arms to folks hereabouts. He suggests checking her warehouse, out in the Velkroy Desert. You can see it from the spot where you're speaking to Goetz and the man.
Head back north through Dalimil to the Desert Gate, then go east through the Southern Velkroy Desert. Get close enough and the true culprit will emerge, accompanied by some Hired Muscle and a few Mangy Curs. Take out the first wave and a second one will appear, along with a few healers. Wipe out the magic users first. You'll receive Steelsilk, Bloody Hides, Magicked Ash, and Black Blood for winning the fight.
After the battle there will be several cut scenes, and Charon will show up to deal with the mess. Return to the Hideaway once all is said and done to complete the quest by speaking to Charon.