I hadn't used LaunchBox for a while, just upgraded from 10.1 to 10.6 and having the same issue.
It's definitely caused by vJoy.
Setting "UseAllControllers" to False works, but is not the preferred option.
Leaving the option to true, if I disable "vJoy Virtual Joystick" in Windows device manager then everything is fine. If it re-enable it, LaunchBox detects nonstopping joystick-up movement (only LaunchBox is affected). The fun part is that windows 10 detects no joystick at all (even with vJoy enabled) so I can't use the built-in GUI option to confirm if windows also detects a stuck "direction up" for this virtual controller.
So the root issue seems to be that LaunchBox is detecting a controller that isn't really considered a controller by Windows.
I used to use "vJoy Device" from Shaul Eizikovich (vjoystick.sourceforge.net) on another computer (replicating a physical controller to 3 virtual ones so I can level up 4 toons at once in Castle Crashers, hehe), but the one causing issues with LaunchBox is named differently "vJoy Virtual Joystick" and is using driver from Headsoft, signed by Ultimarc Limited. So I believe it was installed by the new I-PAC firmware that now allows hotkey switching between KBD, D-Input and X-Input modes. This is an Xtension controller Emulator Edition in my case (currently in keyboard mode).
-EDIT- I haven't unplugged anything physically, but somehow the issue seems to be gone now (I could definitely see the issue on/off half an hour ago, when changing UseAllControllers setting or toggling vJoy Virtual Joystick on/off manually, but not anymore), so I guess unless it eventually comes back I won't be able to help any more than this.