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Lacie died because the Juries commanded all children with red eyes should die, fearing their power. It was also customary for sibkings to kill their younger siblings if they were irregularities. Lacie could ordinarily come back up from the Abyss, but the darker side of it destroyed her completely so she wasn't reborn. The memories that Oswald and Jack saw were all that was left of her because Core preserved her as best it could.

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