Isn’t this normally called a Ponzi scheme?

No, this isn't close to a Ponzi scheme. A Ponzi scheme is fraud where profits are paid to earlier investors with funds from more recent investors.

you mean simulated or pretend profits

The word profit refers to the profit of the earlier investors.

when fraud and bankruptcy courts unravel an investment scheme, they don't "claw back" distributed profits, but they do demand the return of the ponzi's payments that are meant to appear to be profits but were simply purloined from the earlier investors, is what I was referring to. The courts do not consider those to be profits.

It does not. The landlord can just invest the deposit, and then return the principal to the tenant when he leaves, keeping the interest.

At that point how is it better than the tenant investing the jeonse money and using the returns from the investment to pay rent?

The landlord tends to get better returns on their investment, because they likely own multiple houses and they can leverage the money to buy even more, which in turn go up in value. What this means for the tenant is that the amount they save on rent is significantly more than the returns they would get by investing the jeonse money themselves.

But this only works when interest rates are low and housing prices keep going up. Neither condition is true anymore, so now there's a sharp increase in rentals compared to jeonse.

The very existence of Jeonse affects monthly rents, making Jeonse a worthy candidate to consider to tenants.