Possibly new Thousand Master theory
Here's a theory, maybe not a good one, but a theory nonetheless:
As we all know, Nagi is not dead (most likley). Perhaps he got fed up with the secrecy/bureaucracy of the 'Magic World' and decided to wage war with them in order to stop their heretical ways. So Nagi became an evil mastermind and took on a few capable followers. Fate, some other people from his past, maybe even Chao. Maybe Nagi even personally trained his followers so as to make his organization type thing less likely to be overthrown. I can pretty much guess the day he turned evil or so. It was probably the day he gave his staff to Negi. Seeing the destruction of that town probably made him snap. Which raises another question: Why was that town attacked by demons? Was it just random chance or was it planned? Is it just coincidence that THAT town just happened to be where there were a lot of Nagi supporters? some food for thought.