One person's garbage is another person's treasure. If the WO regulars want to merit pictures of big green dildos and scantily clad women, that's their prerogative. The only time the administration got involved is when a merit source staged a merit giveaway. The only requirement was to be one of the first few people to post anything in the WO thread. That merit source had his privilege taken away.
Maybe it should also be noted that he was sending it in huge lots of 25/50 (IIRC) merits for each single post. And, AFAIK, even that was not considered abuse (there were clearly no ill intention or collusion), but Theymos just decided that it was not appropriate usage of the sourced merits.
