"He's had opportunities that other players haven't had. It's just a wasted opportunity for such a talented athlete.
"There are so many other players who would just do anything to get this opportunity. And they watch instances like this and they go, 'why would you throw it away?'
"This is just poor behaviour and a bad choice."
Read more:
Wallabies star Karmichael Hunt charged with drug possession
Karmichael Hunt: Sonny Bill Williams is still 'every coach's nightmare'
League: Hunt misbehaviour claims denied
Hunt was arrested in the early hours of Saturday morning, with police allegedly finding a white powder after searching the 31-year-old in a car park in Brisbane's Fortitude Valley at about 12.40am.
He was charged with two counts of drug possession and is set to face Brisbane Magistrates Court on January 29.
Rugby Australia is waiting for more detail on the allegations but agreed it was in all parties' best interests Hunt, who was fined $2500 after pleading guilty to four counts of drug possession in 2015, be stood down from training and playing.
Waugh was concerned about Hunt's life after sport.
"I actually really genuinely feel for the guy because his last 12 months in rugby has been superb," Waugh said.
"It's just a sad story because the light at the end of the tunnel's hard to see, the second time around, particularly because he's come so far in the game in such a short period of time.
"People are talking about the financial impact as of today, but you've got to look at what the financial impact is post-career.
"You already know how difficult it is for players to transition out of professional sport to life after sport, and certainly these allegations don't help."
Hunt, a former NRL and AFL player who joined the Reds at the end of 2014 shortly before his previous run-in with the law, has represented Australia in six Tests, earning a two-year contract extension in November.
- AAP