No there weren't! There were millions elsewhere!
I looked up your Josephus passage and it dates from the time of Xerxes and Esdras, so around 450 B.C. That's almost 500 years before the time we are talking about...before the collapse of secular Babylon, when the 10 lost tribes were still in the area. By the time of the New Testament Babylon proper was a desolate ruin, and the 10 lost tribes were....well, lost....which they have been ever since.
You are incorrect. [Josephus, Antiquities, Book XI, Chapter 5, Paragraph 2]: When Esdras had received this epistle, he was very joyful, and began to worship God, and confessed that he had been the cause of the king's great favor to him, and that for the same reason he gave all the thanks to God. So he read the epistle at Babylon to those Jews that were there; but he kept the epistle itself, and sent a copy of it to all those of his own nation that were in Media. And when these Jews had understood what piety the king had towards God, and what kindness he had for Esdras, they were all greatly pleased; nay, many of them took their effects with them, and came to Babylon, as very desirous of going down to Jerusalem; but then the entire body of the people of Israel remained in that country; wherefore there are but two tribes in Asia and Europe subject to the Romans, while the ten tribes are beyond Euphrates till now, and are an immense multitude, and not to be estimated by number.
Josephus indeed begins his narrative during the time of Esdras....but he then switches to the present time (first century) when speaking of the ten tribes still beyond the Euphrates.....beyond the reach of the Romans. Notice how he speaks of the Jews during the first part of the paragraph.....but then speaks of Israel when he switches to the ten tribes? The reason he says only two tribes were in Asia and Europe was because Judah and Benjamin were those tribes [II Chronicles 11:1] and the Levites were counted among them....not owning any property.
These are the folks to whom the Twelve Apostles were sent. Paul, being selected for a special mission, was of course sent elsewhere.....which allowed him to go to Rome. Peter was not given that permission and that is why scripture never mentions him being there. He wasn't.
I didn't read carefully enough, yes, he says now.
I'm still suspicious though. First of all, you are saying millions, and I dunno where you get millions. No actual figure is in the text. Second of all, I'm wondering whether Josephus might be making an assumption about their location. I'll do some more digging on this tomorrow.
But you are still dead wrong about Peter not being mentione Scripturally in Rome. Babylon was Rome, not Babylon. Revelations makes that clear. There is absolutely no indication whatsoever that Peter went to Babylon, while every historian/church father/apocryphal writer from the second century onward put him in Rome.
To you, that may be "tradition". Well, that's one tradition more than you got. Nobody ever put him in Babylon.
The people who ought to know best where Babylon was in the Epistle of Peter put Peter in Rome. Now how on earth I'm going to take your word for it over theirs is a mystery to me!