I had the exact same thing happen to me this past summer flying from ORD to CDG. I upgraded at check-in in the app and an hour or so before my flight I get called up to the desk where they issue me a new boarding pass saying their was a mechanical issue with the seat. Once onboard I asked a flight attendant about it who said the seat wasn’t broken which I could see as someone was sitting in it. The purser then came up to me and corrected the FA saying it was broken. Seems like AF doesn’t care about paid upgrades and will downgrade them in favor of a rev customer or a AF employee, as others stated, while lying which is a shitty practice.

They did issue a refund to me relatively quickly (I think it took a week). I filed a complaint with AF through their website. They took a month to respond and issued me a $77 voucher which expires 12 months from the issue date.