Mystic Dagger is the prison of the evil ghost sorcerer Ho Chan. It was stolen by the Purple Dragons, who accidentally released Chan and were turned into his servants.
Donatello threw the dagger to the sea. It is unknown what happened to it after that.
According to legend, the only thing that can defeat Ho Chan is the Mystic Dagger. In c 987 BC. the Emperor was so fed up with Ho Chan wreaking havoc, that he paid the members of the Sorcerer’s Saucer Sauce to join their powers and entrap Ho Chan in the Mystic Dagger. They lured him into a cave by having a young girl play his favorite song, My Darling It’s Only A Stain on the Guqin. Once in the cave, it is recounted that the sorcerers joined their powers though magical rings, and forced Ho Chan into the Mystic Dagger. Upon sheathing the dagger, Ho Chan was trapped. Though the whereabouts of the dagger are not yet known, it is believed that it was thrown in the Yangtze River long ago.
To read the full story, go to Ho Chan