The Defiled Statue was originally a Statue of the Seven devoted to Barbatos. However, it was eventually stolen in an unknown incident, in which Mondstadt's people began telling stories about The Lost Statue of the Seven.
Unlike the other statues, it is inverted and the elemental object in its hands has been corrupted and surging with abyssal energy. This statue is also bound by chains. The Abyss Order tasked an Abyss Herald with protecting the statue from interlopers.
Sometime after Osial was defeated, a group of Treasure Hoarders banded together to distract the Abyss Order while sending a single thief, the Grand Thief, to infiltrate and steal any valuables. Due to untold circumstances, although possibly because due to the Abyss Herald who was tasked with guarding the statue, the Grand Thief met his demise, bowing down in front of the Defiled Statue. The statue would later be discovered by the Traveler and Paimon.
Later, Dainsleif decodes a talisman from an Abyss Mage, concluding that the Order planned to use the Defiled Statue to create a mechanized god. They would replace the core the statue usually held with the eye of the first Field Tiller and then attach Osial's limbs to the arms of the statue. This way, they would create a machine to "topple the divine thrones of Celestia".
Dainsleif then plans to destroy the inverted statue to prevent the Abyss Order from creating their mechanized weapon. When they return to the ruins, the Traveler meets their sibling in front of the inverted statue.