I got Leo as the secret friend before he moved to pelican town so he's not at the festival. I'm in winter year 1 and I had talked to him so he's in the relationship tab but he's only at 1 heart. I'm not sure whether this is a bug or an oversight.
It certainly does not appear to be intentional, and yes, it is a known issue. Worse yet, many folk have to skip the whole event because not being able to give a gift there can cause a crash.
This bug just happened to me right now. I just unlocked Ginger Island and shortly got the letter telling me that I have to give Leo a gift for the event. Couldn't give him a gift because he's still not in town.
Currently playing on Nintendo Switch with Stardew Valley version 1.5.4.2