Hello,
I had exactly the same the problem. In my case the machine was managed by Mosyle.
After some trial and error here is the solution that worked (M1 mbp, filevault On).
1) Boot into recovery mode.
2) Instead of selecting a user to reset the password, select "Forgot password"
3) When prompted, type in the recovery key for the Filevault volume in my case a PRK that was escrowed in Mosyle.
4) Reset the password of the user.
5) Open a tty and find the .AppleSetupDone file (won't work without this step)
6) Reboot the machine - log into the account. (you have to go through setup assistant)
But then you will dropped into the session.
Once logged in, don't reboot as the problem will come back.
7) Remove the FV2 profile in mosyle.
8) Disable Filevault through system preferences
9) Update to 13.3.1 (because of the zero day(s) in previous releases...)
10) Re-enable FV2 in mosyle.
It seems to work... For now..
I wish I could find the root cause, but it requires some further investigations (checking logs, etc). But the client won't pay me for this.
EDIT: After re-enabling FV, after a few reboots the problem re-appeared.
BR
Erik