I had recently updated my Nexus 7 to 4.3. I have TWERP.
-I did not steal or gain my device through any illegal actions-
I bought my device from Google back in February, it bricked itself (it had something wrong inside, and made that creaking sound when held a little tight) in March or July, I sent it to ASUS to get it repaired, (pretty sure I got a different device back). So for a month I was extra careful, didn't root it till recently. (Rooted for the OTG, and other root required features) So then this happens just after I had a sleep. If I could I'd love to change it for the newer model. But I can't. (in tead stuck with the battery draining Tegra 3)
Last night I turned off my device, 8 hours later, when I was going to check my emails, I had the same problem. It's asking for a 'Password to decrypt storage.'
Last night I did not and would never Encrypt the storage, I hear it's a pain to do, that's also the only part of the OS that I've never looked at.
What I don't understand is how this could've happened, I've never used Passwords on my tablet, other than emails and websites. And no, you can rule out anyone in the family to have done it, my family isn't exactly "Technical".
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After reading the posts on this site, I have to say I have wiped the data and started again, shame though I had a lot of data I wanted to keep on there.