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The Blackwater Massacre was a bloody gunfight that took place in the town of Blackwater in 1899. The actual cause of the gunfight remains a mystery. The massacre gained wide publicity due to the amount of men killed and the fact that it took place in such a highly populated and modernized town.
Not much is known about the cause of the battle, only that it involved several lawmen and outlaws. This is likely due to the fact that most of the civilians present didn't know what started the battle and the police have since covered up most of the story. It is possible that much of the story has changed over time and the massacre is known as more of a myth than an actual event because of the mystery surrounding it.
According to accounts of the incident, as many as 37 men were killed, including 22 outlaws and 15 members of the Blackwater Police Department. Although no exact number is known, it is believed that civilian casualties were minimal.
It is fairly possible that Cole MacFarlane, one of Bonnie MacFarlane's late brothers, was one of the victims of the massacre. The evidence behind this is that early in the game, Bonnie says that her brothers died either from foolish choices or sickness. Seeing as how Cole died in 1899 from a bullet wound in the head, it is very likely that he was involved in the Massacre, and was on the side of the criminals.
Landon Ricketts is supposedly one of the only surviving lawman of the incident. The massacre apparently led him to move south of the border to Chuparosa. His status as one of the only survivor has gained him popularity and "legendary" status through West Elizabeth and beyond. John Marston tells Ricketts when he meets him that he knew of his name when he was a boy, likely due to his survivor status in the famous gunfight (though Marston would have already been around 26 at the time of the massacre). Nobody is sure, but judging by the quotes of Willie Oats, he too could have been a survivor.