This is probably incorrect since there's too many different twists and hitches to make an actual guess impossible...but are we in Diagon Alley?
I would have guessed Hogsmeade if the weather was less nice out, or the Ministry of Magic if the weather wasn't a factor. The former since there's been mention of shops, the latter since it's a place that people work, apparently don't want to be, and where people can be observed.
But Diagon Alley seems like the best bet, as there's shops everywhere for people to buy from...and if this was to be, say after the Death Eaters had basically gone through (though that was technically book 7), it'd also make sense that people might be frightened. Though if there was security and dementors stationed throughout, or someone made a wrong turn in Knockturn Alley, then the "people watching" and feelings of dread and being scared may still make sense.
So yeah, I'll guess that it's a version of Diagon Alley with various types of security stationed throughout. Again, most likely wrong since I basically can't tell who is being truthful, but that'll be my guess since I'm positive at this point that I've been figured out.
You guessed correctly. That means Pengu the spy won.
Now how about I reveal all those details, twists, and characters (including what the heck was going on).
@Gerrick was Luna Lovegood. She was shopping that day and happened to be in the area that the Death Eaters arrived. She was one of the first characters to be placed under the Imperiused.
Pengu was Peeves. He was Confunded twice by Snape. At first he was at Hogwarts being himself but thinking he was Mad Eye Moody and still trapped in his trunk. The second time that he was Confunded, he is persuaded to think he has been banished from Hogwarts and because of that he chose to go to Diagon Alley. He was not under the Imperius Curse.
@Red Mones was Mundungus Fletcher. He was temporarily Confunded. Under the charm he was pretending to be an Inferi in the cave with Salazar Slytherin's Locket. After the spell was broken, he went to Diagon Alley to sell all those Black family heirlooms he was stealing from Grimmauld Place on the day the Death Eaters came. He managed to not get put under the Imperius curse.
@Fortis Scriptor was (Garick if I remember correctly) Ollivander. He was at his shop and managed not to get captured at first but he got captured later on and put under the Imperius Curse.
@Katie was Harry Potter. He was shopping at the time the Death Eaters arrived but he managed to put on the Invisibility Cloak before he was seen by the Death Eaters. He was sneaking around and trying to figure out how to free everyone since he was not under the curse.
@Ruguo was Severus Snape. He had already accepted the Defense Against the Dark Arts teaching position but he went to Diagon Alley to keep an eye on the Death Eaters. Secretly he was trying to figure out how to stop the Death Eaters.
The twists that I originally planned to put into the game included extra spies, decoy spies (players given a completely different location), and (accompanying the decoy spies) decoy locations. I did not put most of those twists in because I felt 6 players was not enough to make them work and also wasn't completely sure how experienced everyone was with Spyfall. I ended up putting in some decoy locations and a decoy spy but those were only temporary.
The setting for this game was the day in Half Blood Prince that the Weasleys and co. went to Diagon Alley for their shopping. There were some changes though since if I remember correctly Ollivander had already been captured by that time in the book. The main change is that in the game, Death Eaters decided to raid the Alley and instead of killing people immediately, they were putting people under the Imperius Curse or Confunding them. (this was the basis for all of the weirder stuff having to do with the characters) In the OP when I mentioned there would be changes that players would be notified of; those are what I was talking about when saying that (for example) Ollivander was captured and cursed meaning at first he was free but after the update he was cursed.
Thoughts, critiques, questions? I had some fun coming up with the setup and the background for the game. I did deliberately make it harder for the Spy but you still figured it out, good job.