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Looking at your screenshot it seems that ‘Allow – Users (DESKTOP-3NGIMR2\Users)’ is set to ‘Read & Execute’ for your ‘testfile.txt’. Try changing it to ‘Full Control’. If that doesn’t work then also set the setting for ‘Authenticated Users’ to ‘Full Control’.
I suspect the reason you’re having difficulties at root (C:\) is because of the Windows permissions system denying AxCrypt access. It really shouldn’t be an issue because the file owner is an ‘Administrator’ although Windows does have a hidden ‘Administrator’ account in addition to visible user accounts.
If the file was on your Desktop or in your Documents folder the problem shouldn’t occur. Have you tried that?
Just for your information… it’s really bad security practice to use an account with admin permissions for daily use. It makes your system much more vulnerable to compromise.