Error loading MCP server - ENOTDIR error

Hello,
We are getting this error log when loading a MCP server in Cursor:

Failed to reload client: A system error occured (spawn ENOTDIR).

The issue persisted both in version 0.48.9 and version 0.49.4

What we attempted:

  • Running the full npx command in terminal (it does not fail with an error)
  • Multiple Cursor/computer restarts
  • Updating to the latest version available back then (0.49.4)
  • Running it on other computers - it works for dozens of other devs, this issue persists only on a single computer

Did anyone else encounter this issue, or has a clue on how to further debug and fix it? Thank you

Attached a screenshot of all logs: