In Silverton district you'll find a halfling calling out to you. If you talk to him, he'll reveal he has a bunch of mages' items for sale: apparently pilfered from the homes of those burned at the stake before the witch hunters could gather up the contraband.
If you wish to do business with him, choose to see what else he has, but as he begins to tell you he suddenly looks scared and runs off, asking for you to not reveal why he was there. A moment later several witch hunters appear, asking why the halfling ran off when he saw them. You can lie or turn him in. Note that turning him in means you won't be able to use him as a merchant (and the quest won't appear in your logs).
If you covered for him, examine the item near where he was standing for 10 and to pick up a scent trail, following it a short distance around to his hiding spot. He'll thank you for not ratting him out and offers a discount on his stuff, earning 25 and completing the quest.
- Novigrad, the most cosmopolitan city of the North, attracts its fair share of oddballs and eccentrics. One of them was a merchant dealing in unusual goods. While talking to Geralt he spied some witch hunters approaching and fled at once. Still interested in the secretive merchant's secret wares, Geralt decided to hunt him down.
- Find the mysterious merchant using your Witcher Senses.
- Search the area using your Witcher Senses.
- Ironically, sometimes his hiding spot will be right behind where a witch hunter can spawn.