While battling with a friend some time ago I noticed that Red Card still activates when its helder get killed by the attack that killed him, even though it shouldn't.

To recreate, give yourself 2 to 3 high level pokemons and fight an npc which you've given a lot of red cards to. Make sure you K.O. its pokemons in one attack and battle it. You'll see your pokemons get swapped around although they shouldn't.

Here is a battle I did on showdown with myself to show how killing the Pokemon in one attack doesn't activate the Red Card.
I used the "Frisk" ability to show that the Amoonguss at the start of the battle is indeed holding a red card.

https://replay.pokemonshowdown.com/gen9ou-1887083973-05bil6iyqgiy93ui44dfrgncxkju0zxpw

Thanks

Also, make sure you're not using "Knock Off" to kill the Red Card holder while testing as Knock Off also has a separate interaction preventing the Red Card from activating.

Using this move might make it seem like the "red card not activating on the holder being killed" works even though it's the Knock Off interaction that made it work.

Thanks for this,

I've confirmed that the red card is erroneously activating if the holder faints. This is contrary to the logic in the mainseries games, as well as the showdown example you provided.
Moved to internal to be resolved, thanks!