Snitched on: Humanity. Sick of eating cold gruel in the real world that Morpheus has opened his eyes to, Cypher (Joe Pantoliano) decides that he would rather have his mind wiped and live ignorantly and blissfully inside a fake computer generated world. He strikes a deal with Agent Smith (Hugo Weaving), selling out his crew so he can go back into the Matrix and enjoy eating juicy steaks that don't actually exist.
Punishment for snitching: Dude gets zapped by Tank (Marcus Chong) with some kind of futuristic electricity gun. By far the worst death for a snitch yet.