OpenSSH for Win: switch.exe failed to init properly

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I am using OpenSSH for Windows 3.8.1p1-1 SSH server with light
installation of CygWin package on Windows 2000 Server platform.

I'm experiencing some major difficulties with users logging in to my
SFTP server. While in /etc/group and etc/passwd files reside only
local groups and users, I have an AllowUsers entry in sshd.config
which allows the access for only one user.

When this user tries to log in from a remote location, I get a pop-up
dialog on my server screen saying:

 switch.exe - Application Error: The application failed to initialize

I have the exact same sshd configuration on another similar Windows
platform and it works fine.

By looking in the Event Viewer and tracing Application, Security and
System logs that have the exact date/time of this message, I can see
the following:

 sshd: PID xxxx: Accepted password for myuser from
port x ssh2
 sshd: PID xxxx: Subsystem request for sftp
 User: NT AUTHORITY\SYSTEM - A new process has been created with ID
xxx sshd.exe
 Authentication Service: LsaRegisterLogonProcess()
 MYMACHINE\myuser - successful logon
 Application popup: switch.exe - Application Error: The application
failed to initialize properly

After that the service seems to terminate. The interesting part is
that there are no errors prior to that and every other log, that has
to do something with sshd or OpenSSH, shows only successful return.

Except for the AllowUsers entry mentioned earlier, I have kept every
other default entry in sshd.config. When I start the service with net
start, it shows no errors. But as soon as this user tries to log in,
and after the authentication phase, the message pops up.

If you wish, I could provide you with more information about the
system if that is what you need to help me troubleshoot.

Best regards and thanks in advance.

Re: OpenSSH for Win: switch.exe failed to init properly

Well, perhaps my question was silly or just dumb, but can someone
please direct me to some other group that is more appropriate for my
needs if I hit the wrong one? Anyone?

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