Ticket out of here
The dungeon was known by everyone who had attended a military base. For it was not only used on the students but the military personnel as well. Each place had one, but it wasn't clear to everyone what exactly went on down there. They never explained it to students or the others.
However, there were very few people who would come out from the dungeon and when they did, they would do so as a changed person.
Logan had done a lot of research on the dungeon when Peter was down there, and it turned out that most of the rumors were most likely just that, rumors. The reason for people's crazy change was because they had their abilities taken away.
Essentially, the dungeons around the military bases were a prison, and they would spend their days waiting there until Truedream came and took their abilities away. Making them a normal person, with no such way to abuse their abilities again.