What were the Freedom Fighters?
The Freedom Fighters were a team started by Sonic the Hedgehog to help out and protect people from bad guys. They were somewhat informal in terms of structor but they were all the city had before the formation of the Task Force (which have effectively replaced the Freedom Fighters.
Why did they dissolve?
In the last couple years, the team had a series of failures and defeats, along with many members having either quit or gone back to sleep. When Sonic stepped down and had Shadow the Hedgehog take charge temporary, Shadow changed things about the team including making Knuckles the Echidna second in command, and put Nott in charge of handling combat training. When Shadow kidnapped Tikal and went back to sleep, it became apparent that he had planned to take over the city. Thus wrecking the team's reputation. Knuckles tried to step up as leader and fix things, but it only resulted in just leaving himself, Manic Hedgehog and possibly Fon Master Ion (who Shadow hired to be the team's healer).
Freedom Fighters Member List
Leader: Knuckles the Echidna, formerly Shadow the Hedgehog and Sonic the Hedgehog
Members that left
Tails "Miles" Prower
Nott Lovell (had been in charge of combat training)
Members that went back to Sleep
Sonic the Hedgehog
Shadow the Hedgehog
Link (Wind Waker)
Soul Eater Evans
Death the Kid (He was idle, then went back to Sleep)
Blaze the Cat