This is a bug, and a serious one, which was already notified in forum. I believe this is a bug because after the 15th attempt at replicating the issue when trying to move a file into one of the top libraries, the software prompted me with a warning message stating whether I wanted to delete the file or not. This was the first time where the program asked such a thing. This is, instead, the default behavior in the Windows Drive client.
Anyway, the decision to automatically delete a file, as stated in Drive manual if outside the arbitrarily predefined folder is a violation of any reasonable expected behavior. I do not know who in their right mind would ever think this is a viable solution.
The tool should instead employ its own features, such as the sync error notification, the logs (where none of the aforementioned issues were recorded), and the OS trash system.
Nobody should ever execute unrecoverable delete commands of files or folders, especially where the only safety measure between normal operation and utter chaos is a flimsy pop-up window.
A slightly less unsafe approach, would be to keep the file where it is, notify the user about a sync error and let the user solve the issue. A less optimal strategy would be to trash the file, either in the OS trash or a Seadrive trash (which location should be communicated to the user). Anything but automatically delete a file.