USB "device not found error" when adding to VM - ESXi 6.5

I'm having a weird problem while trying to add a host-connected USB device to my VM. I can see the device when I do lsusb in ESXi ssh terminal:

[root@xxx:~] lsusb

Bus 001 Device 005: ID 0529:0620 Aladdin Knowledge Systems Token JC

...

I can also see the device in the list of USB devices when I edit VM settings:

But when I click "save" I get the following error:

Cannot connect 'vid:0529 pid:0620 path:0/1/5' to this virtual machine. The device was not found.

I have tried restarting the ESXi server, restarting the usbarbitrator service and also plugging the device into different USB ports without any help. So I would greatly appreciate if someone has any insight into what could be causing this or how to fix it?

I'm running ESXi 6.5.0 (Build 4564106) installed from HPE-ESXi-6.5.0-OS-Release-iso-650.9.6.0.28 (Hewlett Packard Enterprise). The physical server is HPE ProLiant ML30 Gen9.