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Thank you so much! :) Here's the explanation for Ending 1:

⚠️ spoiler warning ⚠️

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Chao's stalking made MC develop paranoia and emotional instability.

The random drunkard MC met in the alley was a coincidence that worked in Chao's favor. MC panicked, hit the drunkard, and ran away.

Chao brought the body* to the morgue as a way of telling MC that he knows what they did, and giving MC no choice but to either take his help (destroy the body evidence) or turn themself in (since the ID card has already logged MC's entry).

*Whether the MC's hit killed the drunkard, or if Chao was the one who did afterwards, is up to player interpretation.

Hope this clears things up! :)