The Eye, as he was originally known, was an ancient, wrinkled, and paranoid beholder of the Graypeaks Hive.
The Eye arrived in Skullport in 1205 DR, already a slaver in search of a greater market. In time, his business and his organization grew. At one point, he re-organized his organization into a semi-autonomous model and retreated into the background, spreading rumors about his demise or retirement. Soon, most people forgot about the beholder slaver and in 1304 DR the Agents of the Eye were simply a large slaving ring in Skullport with no association with beholders.
Meanwhile, the Eye investigated the Xanathar Thieves' Guild, a powerful thieves guild, and in time discovered that they were also led by a beholder, a beholder of a different hive. Thus the Eye decided to take control, by killing and taking the position of Xanathar. The Eye discovered all Xanathar's secrets and at the same time manipulated another Skullport beholder, Uthh, into wanting to kill Xanathar. Eventually, Uthh fought Xanathar in his lair; Xanathar slew Uthh but was too weak to resist the surprise attack of the Eye. The Eye killed Xanathar and inherits all his holdings.
The Eye pretended to be his predecessor but, in order to avoid problems, said that "the Xanathar" was just a title. Afterward, the Eye gathered together the Agents of the Eye and the Xanathar's Guild.
The Eye then controlled an extensive slaving operation in Skullport, rivaled only by the Iron Ring and the recently resurgent Shadow Thieves. It also muscled in on Skullport's smuggling operations, at the expense of its beholder rival, Misker the Pirate Tyrant.
The Eye extended its control over all the beholders of Undermountain, forcing those who refused to bow to its rule to flee into the Underdark or to the surface. It sole remaining rival, Misker, was forced to flee into the depths and hid in the abandoned Trobriand's Graveyard.
It was rumored that the Eye was in fact the second beholder to assume the name of Xanathar. His was predecessor was killed by an adventuring band under orders of the Lords of Waterdeep and secretly aided by the Eye himself.
The Eye's primary base was in the southern half of the third level of Undermountain near Skullport in a fortified complex, but it also maintained an extensive lair in the sewers of Waterdeep, linked to its other lair by a keyed portal.