I agree with this, it's actually a good reminder not to trust a preprint server. Arxiv already has an inappropriate air of validity, moderation will only make it worse.
(Incidentally, I don't think misplaced trust in preprints is much of an academic issue, people that are experts in their field can easily judge quality for themselves. It's laypeople taking them at face value that's the problem.)
> people that are experts in their field can easily judge quality for themselves.
This case seems a counterexample though. Top economists Acemoglu and Autour went on record approving of the paper. The main flaws were only obvious to material scientists, and since this was submitted to an economics journal it's possible that if it hadn't been so hyped it would have slipped through peer review by economists
(Incidentally, I don't think misplaced trust in preprints is much of an academic issue, people that are experts in their field can easily judge quality for themselves. It's laypeople taking them at face value that's the problem.)