Here's the reproducer:
-------------------
import java.security.Key;
import java.security.KeyPair;
import java.security.KeyPairGenerator;

public class Main {

    public static void main(String[] args) throws Exception {
        KeyPairGenerator generator = KeyPairGenerator.getInstance("RSA", "SunMSCAPI");
        KeyPair pair = generator.generateKeyPair();
        Key publicKey = pair.getPublic();

        pair = null;
        for (int i = 0; i < 1024; ++i) {
            System.gc();
        }

        publicKey.getEncoded(); // <<< throws KeyException: The parameter is incorrect
    }
}
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This is because when a KeyPair is created both keys share the same native handles.
Thus, when one of them is destroyed (i.e. finalized), the handles become invalid.