Actually the fact YOU come from a toxic family makes it MORE likely. Why have you (plural I inc your dh in that assuming he knows what they're like) used those SAME people for childcare? I too come from a toxic family like hell would they have minded my child unsupervised!
As you've grounded her indefinitely - you've nowhere to go now if her behaviour is bad. It's a ridiculous punishment which I think you know but have mentally locked in to defending. Regarding praise v criticism I believe it requires 3-4 pieces of praise to counter every piece of criticism so you need to bear that in mind too. That doesn't mean NOT criticising/highlighting bad behaviour but the focus needs to be on the GOOD behaviour.
You studiously avoided suggestions of counselling/parenting courses until quite late in the thread - why?
I too am reading a VERY angry mother who is blaming a 9 year old child for a multitude of things that aren't her responsibility and has made no effort to find out WHY this behaviour started.
It could be hormones, but it could also be bullying, abuse, assault (inc a trauma like encountering eg a flasher or someone else being bullied), I'm not familiar with English school system is she facing sats soon?, does she get on with her teacher?, has she fallen out with a close friend?, had her first crush and been disappointed/teased? - tons of reasons why her behaviour could have changed.
"They've always been closer to dd1 though" then it's quite possible even likely that there's been an incident where YET AGAIN Dd1 was favoured and dd2 has (understandably!) had enough! Your denial of the facts ISN'T helping. It IS scapegoating and again makes me wonder WHY you chose to use them for childcare.
You're the only one that can "see" that a 9 year old girl is according to you SO bad she needs grounded INDEFINITELY, manipulative, divisive, attention seeking... Jesus listen to yourself!! Now you're saying she's lazy at school - have you even considered that she doesn't bother cos it feels like nobody cares? That there's no point? How does her sister do at school? Or even that there's something like dyslexia involved?
"He focussed so hard on being the perfect student at school - the stress would build up and he would be difficult at home" also possible
"hundreds I was asked how she was at school." And the VERY first things you said were NEGATIVE.
There's definitely a reset and MUCH better less emotive communication needed. Between the parents, the adults and children. Do the 2 children get along?
Parenting classes at least, therapy would be better. Have you spoken to school re possible stressors?