The AI was used as a tool to generate false stories, but that's not what I assumed when I read the title. It's common for people to "prepare" with LLMs by having them review resumes and suggest changes, but asking an LLM to wholesale fabricate things for you is something else entirely.
I do think this experience will become more common, though. There's an attitude out there that cheating on interviews is fair or warranted as retaliation for companies being bad at interviewing. In my experience, the people who embrace cheating (with or without LLMs) either end up flaming out of interview processes or get disappointed when they land a job and realize the company that couldn't catch their lies was also not great at running a business.