@Paige0You have Instant Booking turned on so that is why they were able to book without approval. As far as blocking the months and they were still able to book it may be part of the bug that has been discussed recently. I would call Airbnb and tell them that you had blocked July & August so no bookings should have happen. Important though is to remove Instant Booking if you want to approve each guest. Airbnb encourages Instant Bookings and in some cases makes it your only option.
See if Airbnb will help with the reservation for July so there will not be a cancelation review on your listing and the potential guest will not lose their money. Hope things continue to go well for you.
Best, Robert and Nancy