Because water is really weird! It's unusual for a compound to expand in volume as it goes from liquid to solid. Water freezing is an exothermic process: heat must be given off. While there is net loss, the amount of kinetic energy that water needed in it's liquid, kinetic form is still less than the energy needed that was converted into potential energy with the raising of the ice.

It’s been too long since I sat in a physics (or thermodynamics) class to say with certainty, but my guess is that the answer has to do with “types” of energy and sounds something like “some of the thermal potential energy translated to gravitational potential energy”. They alluded to this in the above comments too with the notes on the energy required to move the ball - if the ball wasn’t there, then additional (thermal kinetic?) energy would have been released into the environment.

To say it another way - the gravitational potential energy isn’t the only energy in the system. The total energy of the system after freezing will still be less then before despite the increase in gravitational potential energy due to the decrease in thermal energy.

Ice has less thermal energy than water at the same temperature, which more than offsets the slight increase in gravitational potential energy due to ice Ih (the stable form at STP) being less dense.

On a molecular level, when the water molecules have slowed enough with cooling they can form permanent (ish) hydrogen bonds with each other and the shape of the molecules creates the ice crystal structure, even though this means pushing the molecules apart a bit more.