I wasn't a part of the alliance, but I have heard stories from the ex-members. There was a bit of an argument between top members and the leader (Casablanca) where the players were asking for some alliance powers to be distributed (I assume Casablanca had held all the power?). The leader refused and the top players left. Players started jumping ship in large numbers after their best left.
They were being attacked, after losing a few cities like you said, internal issues broek out. One left, everybody else followed. Eventually after going from 900k to 450k the leader Casablanca disbanded it. HyperActive picked up most of the members.
From my viewpoint, i was contacted by one of their leaders who said that there were a number of people who were unhappy about a few things within the Irish Pub. That a couple of their top players were thinking about joining The Guild but that left them feeling bad about people who were not happy but were not in an appropriate location to join The guild. I agreed to look at people who were leaving on a case by case basis. It would of been foolish of me not to, as otherwise these members would logically move to unfriendly teams. Subsequently this happened and we accepted 4 members from the Irish and Highlander teams. The rest who wanted to leave joined The Guild and their other team The Academy. Understandably Casablanca was unhappy about this, but what can you do?