How did Mojang fuck up?

Their gave their "friend", a completely inexperienced unknown writer, 20.000 for a poem. This "friend" took the money, spent it but refused to sign the contract on some bogus pseudo spiritual objection. Later he became more and more upset that notch and team made a ton of money.

To me this sounds like jealousy and greed.

Maybe because they sent the money before fully coming to an agreement and getting a signed contract

But they were all "friends"...

They had a general agreement and by taking the money he basically agreed to the arrangement.

I think they could have easily taken this guy to court and won. Technically, Microsoft can sue the crap out of him for giving away something they have bought and paid for.

They paid for the rights to use the poem in the game, not ownership of the poem.

Also - introducing Carl as a ‘friend’, if true, was unhelpful. Introduce Carl as the commercial guy needed to negotiate contracts and payment, because it would have signalled to the author that he should be engaging his agent at that point.