hcsshim::PrepareLayer failed in Win32: The system cannot find the path specified. (0x3) on Docker Desktop 4.28.0 (139021)

I am encountering "hcsshim::PrepareLayer failed in Win32: The system cannot find the path specified" on Windows 10 Pro Version10.0.19045 Build 19045:

Commandline: docker run --volume "c:\bcartifacts.cache:c:\dl"

docker version
Client:
Cloud integration: v1.0.35+desktop.11
Version: 25.0.3
API version: 1.44
Go version: go1.21.6
Git commit: 4debf41
Built: Tue Feb 6 21:13:02 2024
OS/Arch: windows/amd64
Context: default

Server: Docker Desktop 4.28.0 (139021)
Engine:
Version: 25.0.3
API version: 1.44 (minimum version 1.24)
Go version: go1.21.6
Git commit: f417435
Built: Tue Feb 6 20:55:49 2024
OS/Arch: windows/amd64
Experimental: false

It happens during: Status: Image is up to date for mcr.microsoft.com/businesscentral:10.0.19041.1415
mcr.microsoft.com/businesscentral:10.0.19041.1415
Using image mcr.microsoft.com/businesscentral:10.0.19041.1415

Full Error:
Creating container Container from image mcr.microsoft.com/businesscentral:10.0.19041.1415
e7f2784186ed2e216c869521f6c6362767c03c8fed7fb27160ce78468a447499
New-BCContainer Telemetry Correlation Id: 3f66ddac-bbd9-4aff-8ffc-6fafce473a21
DockerDo : docker: Error response from daemon: hcsshim::PrepareLayer failed in Win32: The system cannot find the path specified. (0x3).
ExitCode: 125
Commandline: docker run --volume "c:\bcartifacts.cache:c:\dl" --label nav= --env isBcSandbox=Y --label version=23.5.16502.17686 --label
platform=23.0.17641.0 --label country=US --env artifactUrl=https://bcartifacts.azureedge.net/sandbox/23.5.16502.17686/us --env multitenant=Y
--env licenseFile="c:\run\my\license.bclicense" --name Container --hostname Container --env auth=NavUserPassword --env username="admin" --env
ExitOnError=N --env locale=en-US --env databaseServer="" --env databaseInstance="" --volume
"C:\ProgramData\BcContainerHelper:C:\ProgramData\BcContainerHelper" --volume
"C:\ProgramData\BcContainerHelper\Extensions\Container\my:C:\Run\my" --isolation process --restart unless-stopped --env filesOnly=False --env
enableApiServices=Y --env useSSL=N --volume "c:\windows\system32\drivers\etc:C:\driversetc" --env securePassword=76492d1116743f0423413b16050a5
345MgB8AG8ANwBUAGYAcwBmAE4AUABmAG4AawBPAHkANQBFAG8AeABVAGQAbQA4AHcAPQA9AHwANgBlAGEAZgA5AGMAYQBiADMAZABkADEAOQAyAGMAOAAzADMAZQA4ADAAOABhADQANAA
1AGMANgA2ADMAYgAyADIAMgA4ADIANAA2AGIAYQA2ADgAMgAyAGUAYQA4AGYANAA3AGYAMAA2ADgAYwBiAGEANQAwADUAZQA3AGEAMgA= --env
passwordKeyFile="c:\run\my\aes.key" --env removePasswordKeyFile=Y --env accept_eula=Y --env accept_outdated=Y --detach
mcr.microsoft.com/businesscentral:10.0.19041.1415
At C:\Program Files\WindowsPowerShell\Modules\BcContainerHelper\6.0.0\ContainerHandling\New-NavContainer.ps1:1969 char:15

• ... if (!(DockerDo -accept_eula -accept_outdated:$accept_outdated - ...

•             ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
  

  • CategoryInfo : NotSpecified: (:) [Write-Error], WriteErrorException
  • FullyQualifiedErrorId : Microsoft.PowerShell.Commands.WriteErrorException,DockerDo

This is after a complete reinstall of Docker Desktop.
I am unable to create New-BCContainer because of this issue.
Any help is appreciated.

Start with the reported docker run command, especially the volume mappings and --isolation process option, then inspect New-NavContainer.ps1 at line 1969 where DockerDo invokes it. Reproduce on the stated Windows and Docker Desktop versions while checking which path triggers hcsshim::PrepareLayer. Done means identifying a reproducible cause and documenting or validating a fix.