Honest question, is leetcode tests an actual failure from the recruiting company perspective?

Sure, it means that from time to time you will reject people like the Homebrew creator. And it also means the recruiting process now sucks for the applicant.

But in a context where it's extremely tricky to evaluate an applicant during the short span of an interview, it seems honestly like the least "arbitrary/trusting your vibes" recruiting method we have now which could be deployed at a large scale.

At least, you are getting people you know had the ability to remember this stuff, and also were willing to put in the effort to learn it.