>>719036997
Did you not play the game?
Not everyone there is a criminal, many innocent people got thrown there because they were opposing Arkham City project, and one of them is Bruce Wayne

>>719037430
If you want a canonical answer, Arkham Asylum and City already explained it
>Hugo Strange uses Mad Hatter's technique to brainwash Quincy Sharp and turn him schizophrenic, who thinks he's Amadeus Arkham (the founder of Arkham Asylum)
>Ra's Al Gul backs up Hugo's plan by providing him finances because he knows who Batman is, hence how he got a whole armed army
>while Mayor Sharp (under Hugo's influence) allows the project, because he views criminals as subhumans that needs to be wiped out