Apparently, Darkrai had just been passing through the town, and ended up getting captured. They threw him in the basement, and without the elders dreams to give him energy, he probably would've died down there. The moment the elder saw Darkrai outside of the basement, he began ranting about how "dark types are evil" and that "they use illusions to trick people". Darkrai tried to explain himself, but the elder just considered it another act of trickery. Knowing that the elder couldn't be reasoned with, Darkrai just flew away.

The elder continued his rant, even after Darkrai left. It was clearly beginning to get on Daniel's nerves at this point. If Anthony hadn't held him back, he probably would've attacked.
"Just ignore him, Daniel." Josh said, taking his badge out of his bag. "Get your badges ready, guys. As soon as Terra comes back with that cure, we're leaving."