I had the same issue occur yesterday with OneDrive local files removed on my Laptop (Ubuntu 22.04, Insync 3.9.4.60020), which was fixed by removing the account and re-adding it with the same base folder. One day later the same issue occurred on my desktop (also Ubuntu 22.04, Insync 3.9.4.00).
I originally thought this was a Microsoft token expiration issue improperly handled by the program so, while it was in the process of deleting other directories I experimented a bit. New directories that I made within the OneDrive synced section instantly deleted locally but appeared in my online OneDrive. So upload worked in some capacity while things were being deleted.