In the early 1900s, Paragon City entered a period of intense industrialization. Corporations quickly accumulated land near Paragon City's profitable port and converted it into a veritable ocean of manufacturing. Warehouses, factories, and sweatshops dotted the once pleasant neighborhoods. Dark clouds billowing from myriad smoke stacks created a permanent noxious fog. Engineers quickly converted the streams and rivers into canals that swept away the constant flow of industrial waste. Paragonians nicknamed this area "Venice" for these omnipresent watercourses.
In the 1940s and 50s, increased awareness of the environment provided the impetus for change in the zone. Slowly, new technology allowed corporations to change their previous methods and cut down on the pollution in the area. While the zone would never become an area for family living, it no longer posed an imminent threat to the health of the city. Saying that one worked in "Venice" no longer carried the connotations of dismal and deadly working conditions. In fact, the area became the poster-child of the 70's environmental movement; it was used as proof that profitability could indeed go hand in hand with environmental responsibility.
This all changed with the Rikti War. The alien invaders targeted a Crey facility in the area in their initial assault. The resulting explosion not only devastated the Crey labs, but also created a strange element that poisoned the area. A greenish miasma now lies as a thick mist everywhere. The once clean waters that made the area famous are now filled with brackish muck. During the war, the area was quickly abandoned; it no longer had any strategic use.
Unfortunately, various villainous elements found appeal in the ruins, moved in, and declared it their own. The Freakshow has carved out one area and created a society in its warped image. "Carnival Town" they've dubbed it; any sane person would simply call it an asylum for maniacs. Chaos, murder and worse are normal events there. But the Freakshow is not alone. Strange creatures lurk in the shadows and attack any intruder. Some intrepid heroes have described these beasts as made of rocks or plants - but no one has yet identified precisely what they are or what their intentions are. And Crey Industries, against all recommendations, has launched several teams into the area to investigate their once great lab. No word yet on their findings.