I'm going to email support but I want to post it for the community wondering if anyone else experiences this.
I'm certain of this finding after tests. I have a new composition started; this is my first one with VE Pro in the iLok system. I set up a Server Project and connected to Cubase Pro 12. It worked at first; at a certain point Cubase tells me the audio device was removed. Doesn't matter what device, in fact it tells me this using the built-in audio which certainly I have not removed. Now with that configuration if I remove the headphones from the jack this message tends to make some sense, or at least if I launch such a project forgetting the phones are not inserted I see a similar message which abates once plugged in. This however is irrevocable. An audio file will not play, the cursor will not move, it's certain death.
I had set the projects up with the silicon native versions. My penultimate Cubase project, w no VE Pro & under Rosetta 2 never exhibited this phenomena. My first guess was one or the other or both are not really silicon-ready under the OS; this started at Mac OS 13.6, same for 14.0 developer beta, same for 14.0 regular release. There is no apparent reason what I have shouldn't function under Rosetta versions so I tried that. No change. So, do I have some corruption in the Cubase project? I rebuilt it as clean as possible from individual MIDI files and reinstatiating all my Host Automation. This project worked at first, just as the original but develops the disconnect. I would test the audio engine with an otherwise empty project with a piece of audio, and it works normally. Is there something in the configuration of the Server Project messing with me? I rebuilt that from scratch. No change in this syndrome.
Now here's the thing; with no VE Pro (I mean it's not open) these projects do not exhibit the issue. Once connected to VE Pro immediately the connection to audio engine is kaput. So during this I've updated the OS twice - edit; no, three times incl to another 13.6 - reinstalled Cubase thrice with numerous deletions of its preferences, & I've un- and reinstalled VE Pro.
At one point the fresh Cubase pulled this with VE Pro merely open, with the last project that doesn't use it. So there's no question that as it stands VE Pro is absolutely fatal to Cubase Pro 12's audio engine. Audio connections and 'Studio Setup' show connections but the fact is audio is dead.