Docker Desktop stopped working

After upgrading, Docker Desktop stopped working:

ERROR: Cannot connect to the Docker daemon at unix:///var/run/docker.sock. Is the docker daemon running?

well it was working before the update now it's in a crash loop.

GUI shows following:
deploying WSL2 distributions
ensuring data disk is available: resetting disk identifier: setting new UUID: setting virtual disk identifier: opening virtual disk: The operation completed successfully. (0)
checking if isocache exists: CreateFile \\wsl$\docker-desktop-data\isocache\: The filename, directory name, or volume label syntax is incorrect.

I've sent multiple diagnostics with no response

After many failed attempts to recover …

Open PowerShell as Administrator: Run the following commands:
wsl --shutdown
wsl --unregister docker-desktop

Afterwards, restarting it worked: