A not unusual problem with interior waterproofing. It doesn't stop the water from entering and damaging the wall.

Yeah that ^, the moisture is still coming in from the soil through the CMU. That is what bubbles the paint from behind. Also, the system's weep holes would "drain" any accumulated water within the CMU cells, however, they probably didn't drill a hole into each cell (min 2 per block) so it's conceivable there is still standing water in the CMUs, adding to the moisture accumulation. The system is not meant to stop water, it is just a gutter system for the water that has already entered the wall.

Even though you probably thought the interior system was excruciatingly expensive, it is still cheaper by far than excavating outside (which is the only way to stop water infiltration).

Thank you for your time and info.