This is the correct behavior when the Federation is in progress.
You have a possibility to check how many accounts conflict after enabling Federation. It means that users, who created a personal Apple account using a corporate (federated) domain, should change it to their personal or after 60 days, the user’s personal Apple ID is automatically renamed to a temporary username.
Link with more detailed information. https://support.apple.com/en-in/guide/apple-business-manager/axme685676ac/1/web/1
Note: You cannot disconnect from a federated domain if Apple Business Manager is in the process of enabling federation or resolving conflicts with other Apple IDs.
Disconnect federation from a domain https://support.apple.com/en-in/guide/apple-business-manager/axmd952e0762/1/web/1
Please let me know if answer was helpful for you :)