When Buddy was won from a present, a message in the chatbox read "It appears as though one of Santa's elves has fallen into the present box. The head elf says you can keep them as a follower!" and a news message to friends: News: Player has unlocked the elf pet from a present!
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His examine is a reference to a line in South Park.
His name is a reference to the character Buddy the elf in the film Elf.
His appearance is a goblin in a Santa outfit, it is unclear if he really is an elf.
Buddy is an elf in The Escapist Santa Sweatshop Edition.