The world of Murim in short, cultivation world is always complicated. The young master, supposedly a 'merchant' in disguise seems to have a grudge against OG Cho Yun (herbalist guy) and the volcanic sect might be one of those who did cross paths or were enemies as their force in numbers might be stronger, not to mention the young master's clan was disbanded due to the past incident.
So this guy wanted to take advantage of the seemingly gullible MC with his disciples as his weak points currently while simultaneously give silent blows to any of the volcanic sect guys who wanted to attempt action against his choice. As for how he knew about it, I don't think it's a good idea to look down on that grumpy assistant guy (can't remember his name) and his group isn't just a typical hillybilly one.
Remember that Murim martial artists need to always watch their backs or here in this case, the green merchant has already planned ahead. Next he might even indirectly put the kids in danger (as I think he had an idea about the ambush) And merchants as a safety precaution need to be careful while dealing with assassins, thieves, bandits and many other factors. The plot would need to continue more though. This much only I could infer for now. Politics be it any time period always gets complicated somewhere or the other. Some I had to read twice as I couldn't understand as well.
It became confusing. The merchant seems to hold a grudge against MC but suddenly he was talking about knowing the weakness of volcano sect. Plus, how they know volcanoe sect’s weakness by seeing its disciple sneaking to assassinate the bandit’s leader? (@_@)