[BUG] VSCode Extension crashes with exit code 1 on SessionEnd - MCP error -32601

Preflight Checklist

• [x] I have searched existing issues and this hasn't been reported yet
• [x] This is a single bug report (please file separate reports for different bugs)
• [x] I am using the latest version of Claude Code

What's Wrong?

Environment:

Claude Code version: 2.1.70
OS: Windows 11, x64
VS Code version: 1.109.0
Auth: OAuth (Claude Max subscription)

What's wrong:
Every session ends with Error: Claude Code process exited with code 1. The session works correctly but crashes on cleanup/SessionEnd.
Key error in logs:
[ERROR] MCP server "claude-vscode" Failed to fetch tools: MCP error -32601: Method not found
Immediately followed by SessionEnd firing and exit code 1.

What Should Happen?

Expected behavior:
Session should close cleanly without exit code 1.

Error Messages/Logs

[ERROR] MCP server "claude-vscode" Failed to fetch tools: MCP error -32601: Method not found
Immediately followed by SessionEnd firing and exit code 1.

Steps to Reproduce

Additional context:

The crash happens on SessionEnd, not during the session — work completes successfully
No MCP servers are configured (claude mcp list returns empty)
The claude-vscode MCP server appears to be internal to the extension
Occurs on both new and resumed sessions
CLI (claude in terminal) works fine
Previously also saw status=429 rate limit errors on oauth/claude_cli/client_data when multiple instances were running on the same account

Claude Model

None

Is this a regression?

Yes, this worked in a previous version

Last Working Version

_No response_

Claude Code Version

2.1.70

Platform

Anthropic API

Operating System

Windows

Terminal/Shell

PowerShell

Additional Information

_No response_