In a country with good consumer rights, this would be a valid reason to return it and get a replacement or refund: It’s no longer offering functionality that was advertised and that you paid for as part of the purchase price.
In the EU this would probably be a no-brainer.
Whatsapp uses the same protocol as signal so MITM is unlikely however there's no way to know what happens before or after the messages are encrypted/decrypted and sent. They can do that scanning at that stage.
Sender cannot know where the recipient is and using P2P would be resource consuming on all client devices (i.e. everyone who uses Signal) so I guess the messages are routed thru Signal's servers though messages are encrypted on device with keys that only the messaging parties know (couldn't find an official diagram for this to confirm).