The random dipolar magnet LiHo$_x$Y$_{1-x}$F$_4$ enters a strongly frustrated regime for small Ho$^{3+}$ concentrations with $x<0.05$. In this regime, the magnetic moments of the Ho$^{3+}$ ions experience small quantum corrections to the common Ising approximation of LiHo$_x$Y$_{1-x}$F$_4$, which lead to a $Z_2$-symmetry breaking and small, degeneracy breaking energy shifts between different eigenstates. Here we show that destructive interference between two almost degenerate excitation pathways burns spectral holes in the magnetic susceptibility of strongly driven magnetic moments in LiHo$_x$Y$_{1-x}$F$_4$. Such spectral holes in the susceptibility, microscopically described in terms of Fano resonances, can already occur in setups of only two or three frustrated moments, for which the driven level scheme has the paradigmatic $Lambda$-shape. For larger clusters of magnetic moments, the corresponding level schemes separate into almost isolated many-body $Lambda$-schemes, in the sense that either the transition matrix elements between them are negligibly small or the energy difference of the transitions is strongly off-resonant to the drive. This enables the observation of Fano resonances, caused by many-body quantum corrections to the common Ising approximation also in the thermodynamic limit. We discuss its dependence on the driving strength and frequency as well as the crucial role that is played by lattice dissipation.
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