Quote Originally Posted by MercuryD View Post
The betrayal was outlined in the DRG job quests. The first Dragoon led a company to Nidhogg's layer, where Ishgard now stands, and attacked him, ripping his eye out at a treasure.
Whether or not the chasm in which Ishgard stands was Nidhogg's lair remains obscure, and if you'd like to speculate that it was, that's fine, but let's hold off on claiming it as fact for now.