Error opening site in Sharepoint Designer "Your account is in a bad state"

Of late we have been experiencing the same issue while signing into SharePoint Designer with O365 account. Investigating into it reveals that Office 2013, the common part where SharePoint Designer 2013 is a member of, is not configured to use ADAL (Modern or MFA Authentication). 

While SharePoint Designer wasn’t initially designed to work with Modern Authentication (ADAL) there are updates available that allow it to work. For SharePoint Designer to attempt modern authentication the following requirements must be met –

1. Most Office 2013 applications will be able to successfully use modern authentication once the EnableADAL=1 registry key has been set. This registry can be set by running below commands on command prompt of your machine.

reg add HKEY_CURRENT_USER\SOFTWARE\Microsoft\Office\15.0\Common\Identity /v EnableADAL /t REG_DWORD /d 1

reg add HKEY_CURRENT_USER\SOFTWARE\Microsoft\Office\15.0\Common\Identity /v Version /t REG_DWORD /d 1 

***(Version entry should already be present in the Registry)

1. The following files must be at least these minimum versions:

ADAL.dll - 1.0.1933.710 or greater

MSO.dll - 15.0.4625.1000 or greater

CSI.dll - 15.0.4625.1000 or greater

By default, these DLL files will be in one of the following locations based on whether the 32-bit or 64-bit version of SharePoint Designer installed:

32-bit folder: C:\Program Files (x86)\Common Files\Microsoft Shared\OFFICE15\

64-bit folder: C:\Program Files\Common Files\Microsoft Shared\OFFICE15\

1. Update your SharePoint Designer and above mentioned DLLs from patches given in the following table 

1. Also note that SharePoint Designer, and other Office applications, cache credentials in Windows Credential Manager. Close all Office 2013 applications, open Credential Manager (Control Panel -> User Accounts -> Manage Windows Credentials) and “Remove” all entries that begin with “MicrosoftOffice15” and “MicrosoftOffice16”.

1. Restart your machine for Registry and Windows update to configure properly.

1. After you changed the Registry keys, updated the patches and restart your machine, you will still get two screens but the second screen this time will take you to O365 Login page 

Caveat: You may think that everything is installed, registry keys are set and the login still does not work. There is no general easy instruction possible, because we need components from different technologies and these are being updated each month. In case you see lower build numbers than in the following screenshot, you may have something more to do.

Hope it helps!

Jitendra