Ditto for The Iliad and The Odysee, yet Troy existed. That's the thing about oral traditions. They are like a telephone game where the story changes a bit with each retelling, so they are not trustworthy, but societies that engaged in epic storytelling did try to keep true to them word-for-word, and that's why some of them are epic poems: to help memorize them. So it's entirely possible that one of the people involved in this story just made it up, but it's also as likely that it was a story they passed down as well as they could, and possibly actually true.
This is not strong evidence for Atlantis being made up. Neither is the fact that Plato made up things like the allegory of the cave: we generally know when he's doing that.
The fact is that we can't find any actual evidence of Atlantis anywhere other than in tenuous ancient writings. A lot like it was for Troy. But since Atlantis supposedly goes back much longer, we might never find any of it, and so it might as well be made up, and that is a safe conclusion.
Those who say it existed nowadays tend to believe that it was in the "eye of the Sahara", in present day Mauritius, and was destroyed in a flood related to an impact event on the North American ice sheet around 11,900 years ago that caused the Younger-Dryas. That idea has the unfortunate / convenient feature that there is literally nothing there and nothing will ever be found there given the scale of the supposed cataclysm. There are huge debris fields off the coast of Western Africa where one could -presumably- find bits of Atlantis, though good luck finding anything obviously man-made in those debris fields, let alone anything that would be highly suggestive of Atlantis. If that theory is true then we'll never prove that Atlantis existed by finding it.