We apologize for the delay in response.
We are unable to recreate the problem you are facing. We tried entering wrong Client ID, wrong API Key and tried using a wrong YubiKey but we were unable to get the error message you have mentioned in your post.
BTW, after entering all the correct values for Client ID, API Key and after using the correct YubiKey, we were able to successfully unlock the Password Safe database using the configured YubiKey.
We have tested the Password Safe application on the following platform:
1) Operating System: Windows XP Professional Service Pack 2
2) Password Safe version: 3.16.02(2504)Y
We would appreciate if you can provide us following information:
1) Operating System details including version number
2) Version of the Password Safe
3) Steps you followed, which led to the error message you are facing