First of all, I would check the interface connection with your PC. Its possible you've partly dislodged the connector, so remove it completely and reinsert it solidly at both ends. I would also recommend sticking with the cable provided, rather than using a different one, and don't use a USB hub or cable extender - they can cause problems.
If midi plays back OK, at least the output side of the 2i2 is fine, as are the outputs in Cubase.
What happens if you use a virtual instrument? I would expect that to be fine too from what you've said, but if it isn't then I think that eliminates the interface as the problem and you need look in the Cubase settings. First though, check your Windows settings to make sure you've got the Focusrite set for audio INPUT as well as OUTPUT. Don't use Realtek or ASIO4ALL, or anything else other than the Focusrite.
https://www.youtube.com/watch?v=IWqsjpdStyc
Its possible that there's something dodgy in your Cubase setup - make sure you've selected the Focusrite ASIO driver in Cubase and not the generic ASIO or multimedia driver. Also, try recording into a clean project, just in case its a CPU loading issue. If that checks out OK, it might not be Cubase. You could try recording Audio into another program, such as Audacity to check for distortion. If there is none then its Cubase, but if its still there its probably your interface.
Do you get the same distortion whether recording guitar, bass or microphone signals? If its mic only, do you need phantom power, or if a its a dynamic mic has it been damaged? If its guitar or bass only, are they active pickups (or a piezo on acoustic) that needs a new battery?
If the problem occurs ONLY when you record audio in through the 2i2 input channels, do they both give the same problem? I wonder whether it could be in the 2i2 setup. From memory (which I admit is a bit foggy), there's a utility (Focusrite Control Panel?) where you can setup the interface levels and routing. I would be looking in there for something that isn't set up correctly, such as input/output levels. There might even be a default setting you can revert to.
If you think you need to reinstall the driver I seem to recall that there's an order in which you need to do things for it to work correctly.
There's more info here...
https://focusrite.com/en/get-started?pr ... ariant=537
Also, make sure that you have the correct driver for the 1st Gen 2i2, just in case the driver has changed for later versions.
If you've eliminated all of the above but still can't find the problem then you might try Focusrite themselves. I've found them to be helpful when I had problems in the past. They rapidly exchanges a faulty unit that was still under warranty and I couldn't have wished for a smoother and faster service.
Good luck!