That can be the case, or because of waitlist (including award) clearing, or plainly because the flight is way overbooked. Op-ups at check-in happen quite often these days. >5 years ago, op-ups (especially for ex-HKG flights) often happened at the gate. They would have a stack of BPs (sometimes even 20-30 of them) at the gate. When a BP is rejected, the gate agent would call out the BN and someone would scramble to find the replacement.

I think doing that at check-in (or at a lounge) can reduce the chaos at the gate, especially if a passenger prefers to sit with his/her traveling companions and declines the op-up.

Remember there's also standby staff travel, that's why last minute adjustments are required

I think it's because some people check-in just before it closes.

It could happen. But, in most of the cases it is because of the flight has been oversold at least 4 days before departure. The expected no-show did not happen (for certain route at certain period the airline expect certain number of sold Y seats not to be taken, often the prediction can be wrong or just close). The second possibility is reconfirmed groups seats are underestimated. When a group reserved spaces before final confirmation of the number of passengers, the airline already sold large number of Y seats to FITs at a higher price. When the group final pax lists come higher than the estimated airline have a situation of lower yield as well as potential oversold. If J is terribly empty the airline normally will try to sell more high Y fare to mark up the yield without turning away the group passengers. Last minute Y fare in international travel nowadays are rare in between.

Standby staff travel can reduce op-up chance for other passengers:
* I was on a HKG-SFO flight about 4 years ago. J was quite open. Suddenly it showed J0 C0 D0 I0. I thought I had a chance to get an op-up to F. In the end, CX's COO took the F, and I stayed in J with about 20 CX staff members .
* CX's own ID travelers can also travel in any available cabins.

It depends on the seniority not everyone is like the COO and not every staff is eligible to premium cabins

That is probably the case, but when Y is full, CX needs not put staff in Y and op-up others.

One time I was sitting in Y with my adjacent seat occupied. The ISM moved a passenger 2-3 rows behind to J, and moved me to his seat - as his adjacent seat was vacant. The passenger's wife is a crew member on the flight. Even an CX ID passenger can take a seat in J before any op-up occurs.