Certainly, it's a squatted domain the owner has never had any interest in actually using and is now no longer even interested in holding. If what is in the article is true then I don't even think Microsoft should necessarily own the domain let alone put it out for public bid to see if a good guy is willing to pay more than a bad guy could make off of it.
The guy even claims "I don’t really need the money. I’m basically auctioning off a chemical waste dump because I don’t want to pass it on to my kids and burden them with it." so revocation and locking seems perfect, it's exactly what he wants.
You're putting up two completely different arguments here:
1. The domain was squatted and the owner did not put it to good use.
2. Because of a third party the domain is so toxic that it should be disabled for eternity.
Those are very different reasons, which one warrants a revocation?
The first one is true for very many domains and probably a large reason that ICANN and registrys have large revenues. The second one is probably unprecedented under a gTLD.
If this was under a cTLD I would agree that it would be okay, if accordance under that countries laws and a proper legal process, but under a gTLD I think these measures should not be taken.
Two arguments yes but they aren't presented independent as you pose. Scenarios where 1 xor 2 is true is a much more complicated conversation that we don't need to get into in this case. Is there a general solution to those scenarios independently? Maybe but I don't know for sure in that case.
What I do know is an inactive domain the owner wants to get rid of because it's a massive burden due to being so toxic should be revoked and locked not sold to the highest bidder. I don't know what we should do if it were an active domain and the security question were posed or what we should do about squatting in general (though I will say the money from the sale does not go to ICANN or the registrar).
Scenarios 1 & 2 have very different rationales for being applied to a gTLD though. Scenario 1's problem (domain squatting) has been the fact for basically forever for all TLD's. Scenario 2's problem would be pretty novel to fix at least for gTLD's, so it doesn't really matter as long as Scenario 2 is in the game.
I'd also be interested if he said he would willingly give up the domain for free if it would not pose a security risk? From my read he still wants to sell it to the highest bidder.
The guy even claims "I don’t really need the money. I’m basically auctioning off a chemical waste dump because I don’t want to pass it on to my kids and burden them with it." so revocation and locking seems perfect, it's exactly what he wants.