Just in case you haven't read that issue of the manga...
Originally Posted by INoKnowNames
Natsu: So why did he do that?
Makarov: He basically killed his version of Happy...
Natsu: WHAT he killed HAPPY! (goes ballistic)
Happy: I'm right here!
Natsu: I thought you said...
Ezra: Idiot! He said the sabertooth guildmaster murdered Sting's Exceed companion right in front of him and Sting punched a hole in the guildmaster's chest killing him!
Natsu and Gajeel glance at each other as the three Exceed's look at each other: GOOD for him!
Pretty much figured that out when Gildarts and the other wizardress found out she was a spy, the fact she was Lucy's favourite childhood toy was a surprise though.
Brain or whatever he's calling himself is overdue for a buttkicking, question is will he be absorbed by the infinity clock releasing Lucy because that would be poetic justice at this moment!