WSL destroys home directory without warning after system restore

Environment

Windows build number: Microsoft Windows [Version 10.0.18363.1082]
Your Distribution version: Ubuntu 20.04
Whether the issue is on WSL 2 and/or WSL 1: Linux version 4.4.0-18362-Microsoft (Microsoft@Microsoft.com) (gcc version 5.4.0 (GCC) ) #1049-Microsoft Thu Aug 14 12:01:00 PST 2020

Steps to reproduce

I use Ubuntu launcher from Microsoft store.
After I restored system to earlier state due to unrelated problem with recent update, I tried to launch WSL and got message "please wait, installing...". Then I was asked to create an user and afterwards I ended up in empty home directory.

WSL logs:

Expected behavior

WSL should warn people that their installation is unusable and has to be reinstalled, so they'll have a chance to recover any data they may have had in WSL

Actual behavior

My data was overwritten without a warning.

I also noticed that while /home directory was recreated during reinstallaton, some other directories were created long time ago (see screenshot).

No source files, tests, or entry points are identified in the report. Start by reproducing the system-restore flow with the stated Windows and Ubuntu versions, then determine how WSL detects an unusable installation; done means users are warned before existing home-directory data can be overwritten.