@dazboj Man! Thanks! It solved the issue on my side.
To fix it:
I removed the group
Deleted old SDK using xcrun simctl runtime list + xcrun simctl runtime delete <id>
Rebooted system
Installed the new SDK via Xcode
The reboot step was crucial. This is the same problem as in my thread: https://developer.apple.com/forums/thread/853154
Also, I think it's worth mentioning what is the impact of deleting daemon group. Based on AI:
The daemon group (GID 1) is a system group used by background processes (daemons). A regular user normally shouldn’t be a member. If your account ended up there, it could be because of:
a manual change (e.g. following a tutorial or running a script),
software that modified group memberships during installation,
an attempt to work around file permission problems.
After removal, your account loses the access that membership provided, namely access to files and directories whose group is set to daemon with group permissions enabled. This restores the standard, more secure state.
Is it safe?
Usually yes, if your account isn’t supposed to be in that group. Still:
The command requires sudo, so make sure you understand where it came from.
Replace <your_username> with your actual username (you can check it with whoami).
Logging out and back in is usually needed for the change to fully take effect.