Turns out this new quiz mode crapola was suggested over a year ago and earned itself 7 votes.  Kudos to the person that suggested it if his evil plan was to make CF look even worse than it already does when it comes to trust.  Or the lack thereof.

Another suggestion that had 8 votes was to have an optional practice mode before going into quiz mode, where the worker wouldn't be penalized for incorrect answers, and would be shown their mistakes along with an explanation.

That suggestion was fairly well received by other TAs, and Lukas himself liked it, adding that asking contributors how confident they are in their answers might be interesting as well.

So why is it that CF chose the suggestion that alienates the workers and creates an atmosphere of distrust, rather than the one that would be most beneficial to all involved?

Because CF assumes that ALL workers are cheaters, and would (lazily) rather punish the majority due to the actions of the minority.