it is possible that the encoder is not installed correctly or is defective. many have installed these wrong or had defective part. remove encoder and check for proper alignment to the engaging fork.
when this is being done recheck the wiring especially the smaller sensing wirings to report encoder position.
with one front wheel off the ground see if you can rotate it. if not the front locking actuator is locking the front axle together .
if the fluid now is still blue then there is a very good chance this is an electrical issue.