Hello. I am a Dungeon Master. I usually put way too much context here so I'ma skip it.
The campaign I am currently hosting has a minor villain (more of a sidequest) who is a medusa, though only recently changed. With a well earned messiah complex and a voracious need for attention, she descends into madness as her life begins to crumble around her as she is turned into a medusa (I love insanity arcs). Party left her alive (its complicated and requires way too much context), and I wanted to consider how this may impact the plot, because this is based on Out of the Abyss and thus Demon Lords everywhere (and I added... just a *few* more of them).
According to the Monster Manual and forgotten realms fandom, medusae are created by "vain mortals could strike bargains with powerful fiends such as archdevils and demon lords, offering everything in exchange for the gift of long-lasting beauty, power, and the admiration of others. Upon the expiration of the splendorous years bargained for, the price was collected and the mortals were turned into medusae." (forgotten realms fandom). But who more specifically? And why? If its just a bargain of exchanging soul for beauty, what's the need for transforming them into monsters other than to deter potential future customers?
I thought for a bit the medusa transformation, which comes with insanity, would end up with their soul going to the lower planes. However that doesn't benefit a Demon Lord unless it specifically goes to that Demon Lord. And it says already in the bargain "offering everything in exchange", which probably includes their soul. And if being a medusae makes them live forever until killed, then that delays the delivery of their soul until some random group of adventurers show up.
Perhaps a specific Demon Lord creates them because that Demon Lord enjoys it or something (Demon Lords are chaotic evil, they do what they want), but forgotten realms fandom's list of (lesser known) demon lords contains no mention of medusae.
And thus I have come here to ask the wise folk of dndbeyond:
"Who is behind the bargains that create medusae and why do they do it?"

Thank you in advance.

Simply put, fiends do this to people who make bargains with them because fiends are total a-holes.  They don't need to do it, but they can and the side effects of turning someone into a medusa are misery and destruction and that's always a plus in the mind of a fiend.  The medusa's presence is not good for civilization and also often kills a lot of heroes.  And fiends are immortal, so having to wait around for a few centuries to get their soul while the medusa is despoiling the land isn't a big deal.

As far as which fiends can do this?  That's the GM's call but any fiend with legendary actions is a good bet unless it's a really dumb critter like a goristro.  And remember, just because the soon-to-be medusa had to trade their soul away doesn't mean that that's the only thing that the fiend demanded.  They could also try to get some routine virgin sacrifices, or force the person to defile or allow the fiend to defile a holy site or sacred item, or some other nastiness, too.

Thank you for your response. I suppose having this threat lurking around would be bad, and bad things means people are in danger. And people in danger are more likely to make sacrifices (*cough, soul, cough*). I don't believe *all* fiends are cruel for the sake of it. Zariel for example is cruel and will murder innocents without a thought, but only if its for the sake of murdering demons. Though Zariel is probably not a great representation of devils since she is a former angel. Though sneaking that into the terms and conditions of a devil's contract might be difficult if someone knows how to read. Though I guess devils excel at what they do. And using the medusa to get some sacrifices (virgin or not) could also be useful. With the insanity and a bit of corruption you could probably get a medusa to start making sacrifices to you and the like. Thank you for your input once again.