I spent hours trying to solve this bug and the solution was so simple. 
My rpcpassword in my bitcoin.conf file contained a '#' character.

Prevent this from happening, by outputting this an error or warning when users run bitcoind.

Right now, you can have a # character as a password and it will work on the command line but will fail when you JSON-RPC.
#include <util/system.h>
#include <chainparamsbase.h>
#include <random.h>
#include <serialize.h>
#include <util/strencodings.h>
#include <stdarg.h>
#if (defined(__FreeBSD__) || defined(__OpenBSD__) || defined(__DragonFly__))
#include <pthread.h>
#include <pthread_np.h>
#endif
#ifndef WIN32