The grinder nut is too wide.
The collet is jammed into the arbor.
Exactly what happened, I can’t say, but if you have any other collets for the grinder, check if there is some type of retaining ring that holds the collet into the collet nut.
If not, either the arbor, or collet nut, or maybe the collet, are totally fucked.
The collet seems to obviously have been pressed down by itself into the tapered recess in the arbor.
The first thing to fo is to try to remove the collet from the arbor, since just tightening the collet nut might **** things further.
If you have a short strong pick or hook that can fit thru the center of the collet, that would be the best way to remove the collet.
Trying to use plier on the groove on the front of the collet would be bad, since this could mar the surface.
Maybe a bearing or gear puller with thin jaws could be used if you have access to the right size.
Normally nowadays on current collets, the groove at the front of the collet is supposed to be locked into a ridge on the inside of the collet nut.
When you loosen a collet that has been tightened into a grinder, the ridge on the inside of the collet nut pulls the collet out of the tapered recess, loosening the collet tip and allowing the bit to be removed from the collet.
The same ridge in the collet nut also pushes the collet into the tapered arbor, tightening the collet around the bit shank.
If you tighten a collet and nut that doesn’t have a bit in it, the collet can get depressed, and possibly deformed into the arbor recess, screwing up the collet, and freeing it from the collet nut.
In this case, you may have to replace the collet.
In extreme cases, this can also expand the arbor recess, screwing up the arbor, which may then also need replacement.
A similar situation can happen if you try to tighten an undersized arbor in a collet, such as a 6mm bit shank in a 1/4”(ie. 6.35mm) collet. Since the bit is undersized the collet gets compressed, freeing the collet from the collet nut, and the collet gets stuck in the grinder arbor.
Alternately, maybe some part skipped the heat treat process and got stretched.