I don’t believe LSD fits into the known causative pathways to dementia. It can, however, be connected to some of the schizoaffective symptoms: that is common.
Yes, the early “researchers” (See Eye Yay) seemed to think it mimicked Schizophrenia in otherwise healthy adults fairly closely. They had little success on actual Schizophrenics, on whom it was said it had little effect.
In the earliest years, from the 1940s to early 1950s, the thinking was this was LSD was great stuff, so great that it should only be administered to the real movers and shakers in society. You know, the “Elite”. I guess they changed their mind, and by the late 1950s thru 1960s decided California was a good place for deployment.