Islamic State (ISIS) fighters who abandoned the Iraqi city of Ramadi in the face of a withering assault by Iraqi government forces thought they had found safety when they fled to the ISIS bastion of Mosul.

They were gravely mistaken. The ISIS forces defending the northern city gave them a literally "warm" welcome—by burning them alive in the town square, sources told Fox News.

Talking to their relatives in the U.S., Mosul residents recalled the grisly punishment handed out by the ISIS leadership to the fighters who quit Ramadi.

"They were grouped together and made to stand in a circle," a former resident of northern Iraq who is now living in the U.S. but remains in touch with his family in Mosul told Fox News. They were then "set on fire to die."

Other Iraqi-Americans and newly arrived refugees with close relatives in Mosul also told of the harsh punishment meted out by ISIS commanders on militants who fled Ramadi.

Sources in Iraq said the ISIS leadership is increasingly becoming paranoid as Iraqi government troops, backed up by the U.S.-led coalition's air power and Kurdish forces, are now moving to Mosul in preparation for an offensive to retake the city.

This has caused jitters on ISIS commanders who have stepped up their execution of residents, including women and children, suspected of being spies.

"They come to the house and take the children and accuse them of being spies," said an Iraqi now residing in the U.S. with knowledge of the situation. "If the mom cries and gets upset at them, they accuse of her being a spy, too and take her to the jail and later kill her."

The ISIS suffered a major blow when Iraqi forces recaptured Ramadi, the capital of the mainly Sunni-populated Anbar Province which ISIS took over last May.

Michael Pregent, a terrorism expert and former intelligence adviser to Gen. David Petraeus in Iraq, said the terrorist group is now feeling the heat of the coming onslaught on Mosul.

"ISIS is fracturing, paranoid from within," Pregent said. "They are using women and children executions to intimidate – the harsher the tactic the more desperate the leadership is."

Clint Watts, Fox fellow of the Foreign Policy Research Institute, said the ISIS is continuing to lose territory and reeling from a growing number of defections. He said the ISIS is blaming its battlefield defeats to alleged spies, "many of whom they have killed mercilessly," he said.

Earlier this year, the activist group Mosul Eye reported that ISIS massacred a large group of men and children at Alhud village just south of Mosul, accusing the entire township of apostasy and serving as spies for the Iraqi police forces. In late December, Mosul Eye activists said several teenagers were caught trying to flee across the Tigris River toward the Kurdish region. They were subsequently accused of being "spies" and quickly executed in front of their families.