Yes, this has been a known bug, but the 35.1.0 changelog states that this damage cap was fixed. However, after reaching 500k damage, the tornadoes still keep their hitbox, but fail to distribute damage.
It would appear that Zephyr's tornadoes stop distributing any type of damage to nearby enemies when it receives too many electric procs.
I assume this is DE's attempt at fixing electric recursion... but this really isn't how it should be done. It just feels bad and makes electric unusable on Zephyr. Unfortunately, I have put violet archon shards for primary electric damage on my Zephyr, essentially rendering my tornadoes useless when using my primary.