Does Google frown on sites that advertise on warez or proxy sites? For example, if I advertise my site on a warez or proxy site, will I be penalized? If so, is there an available list of "types of sites" one shouldn't advertise on?
I know google doesn't allow adsense on warez sites, as for links on those sites, not sure if they'll penalize you for them.
Google does not penalize warez or proxy sites, you can verify this by the fact they come up in search results by the 100,000,000s of millions. You want to build backlinks from "relevant" sites, this means a site with directly related content topic to yours.
If you have links from banned or bad web sites, the worst that can happen is that google will not count them. Google will not penalize you. If Google penalize sites for having links from bad sites, then people will start to put their competitors links on such sites.