Tree J325 Spindle Problem

I'm a bit of a newbie to the mechanics of CNC machining, but I'm learning. I know programming... repair, not so much.

My company recently bought a Mach3 retrofitted Tree Journeyman 325. Initially, things worked great. But the other day, I noticed that running the spindle with a CAT40 tool holder in place, the spindle rotation was wobbly (at 1200 RPMs). I took the tool holder out and ran the spindle without the holder (still at 1200 RPMs). Well, after vibrating even louder than before, I quickly stopped it. After a tiny bit of smoke and the smell of burnt metal, noticed the bottom of the keys on the "spindle taper" were about 0.25 inches lower than the key guard. Before, the bottoms were flush.

Now, when I insert a tool holder into the "spindle taper", the ball grip does not grip the pull stud. In fact, the balls do not even move when I activate the clamp switch. Air pressure is fine. The taper has been lowered, so the spring on the drawbar does not move the ball grip.

Now, hopefully I just need to tighten something, but this is where I am a little bit lost. I bought this machine used, of course, but I do not have any manuals or assembly diagrams.

Please see the attached pictures! I was able to remove a bolt inside the taper, which I assume was attached to the drawbar. But the "spindle taper" is still tightly attached.

Is there a nut I may need to tighten? Perhaps at "D" and/or "E"? What tool do I need to use to do this? I'm hoping I do not need to remove the whole spindle assembly. And suggestions on what happened and what I should do from here? Please help me out!

Picture Legend:

A. Spindle
B. Spindle Taper? (Not sure of actual name of the component... would love to be enlightened!)
C. CAT40 Key (I removed other key... just because...)
D. Slot (x 2)
E. Slot (x 4)