The error only appears to affect PuTTY private keys (e.g., .ppk) and does not affect OpenSSH keys.
Please repeat the process described below using an encrypted PuTTY private key.
ORIGINAL ERROR DESCRIPTION:
This error occurs on both Windows and Mac.
Here are the steps to reproduce this error:
Create a new SFTP bookmark in Cyberduck that uses a private key that is encrypted with a passphrase.
Double-click the bookmark to connect.
When prompted for the passphrase, enter the wrong passphrase and click the "Save password" checkbox.
The passphrase login will disappear, the user will not connect to the SFTP server and the user will not be prompted to re-enter their passphrase. If you double-click the bookmark again, an additional SFTP session is spawned but there is no opportunity to re-renter the passphrase (i.e. the passphrase prompt does not reappear).
What should occur is that the user should be re-prompted for the correct passphrase.
The workaround is to close Cyberduck, reopen it, and then Cyberduck will give the user an opportunity to re-enter the passphrase.