They double-double-crossed the rest of the gang. Kitty and Colfax set up the Swede to think Colfax had double-crossed him so that he would hold up the whole group, thus exonerating Colfax (as far as Dum-Dum and Packy were concerned) because he'd been ripped off too. Kitty then ran off with the Swede, holed up at a hotel and left two days later with the money. She then married Colfax (who thus got the money back as planned from the start), meaning neither could ever testify against the other.
The time at which the factory burned down was an important element. Kitty told Packy and Dum-Dum about the change of venue before the original meeting place burned down, meaning she had a part in the arson. She told the Swede that Colfax had changed the venue (as she and Colfax had planned in order to make the Swede steal all the cash which she'd then steal from him) much later - and she didn't tell him about the original place burning down. The Swede was led to believe the change of venue was purely to double-cross him, so that he would steal all $250,000.
The reason behind all of this was just greed: Colfax and Kitty wanted all the cash for themselves, not just a cut of $100,000. But they knew that if Colfax simply took the cash, the other partners would go after him. Hence the elaborate setup: to make the Swede the fall guy.
Hope this helps and makes sense!
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I'm writing all this down in my memoirs so if I grow up twisted & warped, the world will know why.
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