This problem occurs on VsCode v1.27.2, v1.28.2 and the Insiders version I downloaded today (1.29.0-insider), and rolling back to v1.26.1 no longer exhibits this problem. I also tested it with extensions disabled (--disable-extensions)

I have a small application watching JavaScript source files and when I save the file in VSCode they get copied to another folder (for debugging with Chrome). This app is a C# application that simply calls System.IO.File.Copy(sourceFile, destFile, true) where sourceFile is the file I am editing in VSCode, in response to a System.IO.FileSystemWatcher notification. As far as I can tell is simply uses Read access with a Read or Delete share mode.

Having used this mechanism for more than a year successfully, since updating recently it now appears that the Sharing Violations which are probably expected in this environment have a disastrous effect in that the file becomes a blank file (perhaps a brand new file replacing the previous file). Sometimes VSCode shows an error that says:

Failed to save 'myfile.jsx': A system error occured (EBUSY: resource busy or locked, open 'full/path/to/myfile.jsx')

or

Failed to save 'myfile.jsx': The content on disk is newer. Please compare your version with the one on disk.

I can reproduce this when simply starting VSCode with no extensions (--disable-extensions) (my "code watching" app is already running) and then pressing Ctrl+S (Save) to save the unmodified file. After between 1 and 5 presses of Ctrl+S the file becomes empty.

I have attach the raw Procmon.exe capture, where I started VSCode (no extensions), and a single Ctrl+S resulted in a blank file. Note the SHARING VIOLATION which I suspect is where the problem lies.
Logfile4.zip

Please let me know if there is anything else I can provide.