Looted from the King of Leeches, located in the Eastern Sewers. The boss can be accessed via the Eastern Sewer entrance or, more directly, through a trapdoor in the Gardener's House.
After the King of Leeches has been defeated, the sword can be crafted at an Anvil of Zenithar using the following materials:
Requires Vigilant. When crafting, it is important to note that the Moonsword of Jone can also be crafted, using one less Moonstone and Malachite. This sword does not have a display.
The latest update features "Weapon Arts", unique powers available while the weapon is equipped, for select weapons added by Vigilant. The Bard's Dagger bestows the "Moonlight Arrow" power, which launches a magical blast forward at the cost of 140 Magicka.