It is possible that your adult child’s behavior could be a sign of mental illness, such as a personality disorder or a psychotic disorder. Only a qualified mental health professional can make a proper diagnosis.
That being said, intentionally lying to children in order to scare them or cause harm is not a normal or healthy behavior. It can have a significant negative impact on the children’s mental health and well-being, as well as the relationship between your daughter and your grandchildren.
It may be helpful to encourage your child to seek the help of a mental health professional who can assess their behavior and provide appropriate treatment or therapy. You could also consider seeking support from a family therapist who can help you and your adult child to work through any issues and improve communication and understanding within the family.