This was an age of dread, in which the menace of demon cults infiltrated the nascent Empire, spreading distrust and fear. Many of the great institutions of the Empire were laid down in this era, as mankind tried to unite against the threat of the Demon Cults.
It began in Karzig, where a magical experiment went awry, opening the first hellhole and tainting its folk. Some became Tieflings, while others went mad; everyone fled and most of the survivors died or turned to demon worship and founded a flock of cults. The first Diabolist appeared, trying and failing to control the cults. Instead, the cults flourished and grew. Some of them became hereditary cults. Others spread by recruitment. Some were founded because whispers in someone's mind slowly corrupted them and they gathered a cult. Their goals were also diverse and remain so - some wish to become demons, others hope to rule alongside the demons, some want to see the world burn and some are florbily cunning the cuckoo.
At first, only vigilante mobs responded to the rise of the cults, but Emperor Heinrich III (108-119 IY) founded the Imperial Witch Hunters in 109 IY to root out demons, devils, devil cults, the Diabolist's agents, and those with supernatural powers opposed to the Empire. Wolfgang Meiner was the first head of the IWH, and he was soon on the prowl.
It soon became apparent that the government was itself infiltrated. Tax and customs collectors found it easy to scout out the Empire to both extort funds for the cults and to find remote hamlets to sacrifice to their foul demon overlords. The burning of Manfred von Gauss, a corrupt tax collector, in 232 IY brought on a revolt by the now long gone city of Northport, but it also was wildly popular and strengthened public support of the Witchhunters. (Northport was ultimately destroyed in 240 IY by the Burning Crusade; naught remains of it but strange petrified ashes which you can find in the Fangs today.)
The Diabolist controlled his own network of disciplined cults. A lot of his energy was consumed keeping them in line.
In fire. The last gasp of the cultists facing off against the newly formed legions of the Empire and the Witchhunters. Unable to contain every splintered cult at once, too many rituals at once went off successfully, near destroying the fledgeling Empire in a holocaust of demon-spawned fire. The regions close to Highrock (now Drakkenhall) survived this best, as they fled into the city and its protections against the power of the sea protected them as well.