I ran into this issue before in the very beginning of the expansion, and I’m not surprised to see they have yet to fix it. I argued with a game master for quite some time over the issue, but sadly to no avail.

Basically what happens is this: the upgrade tokens you get from PvP don’t really just increase the item level of a piece of gear, but actually completely replaces the piece with one in the database. It’s basically generating a completely new piece of gear, removing all the tertiary stats and sockets that were on it previously because it’s obeying the same rules as if you were looting a completely new piece of gear, while giving you the corresponding gear piece identical to the one you’re upgrading, but with the trophy’s rank text and improved item level added to it.

I hope this helps.