After Luka and party leaves and starts discussing what they should do next, the focus shifts back inside to Kagetsumugi who is speaking with someone. After an ominous exchange, it is revealed she is working with Black Alice. She is creating an army of powerful puppets for the Black Alice faction so they can assume dominance in the war for the Monster Lord's Throne.
Kagetsumugi is actually the fourth puppeteer. The first was chosen by Black Alice 500 years ago and they've been perfecting their technique since then.
She is an extremely powerful puppeteer, armed with four Monster Lords in her doll collection. Goddess Ilias, despite not having seen her creations, once stated that Kagetsumugi would very easily overpower La Croix.