I didn't test whether or not LUKS or similar filesystem level encryptions are transparently mapped to the Windows kernel.
Might be a good way to avoid this behavior. The default (from the Windows Store) Ubuntu based VM however doesn't use filesystem level encryption, and every folder or file inside the "VM" is available somewhere buried in the Roaming folders.
Yeah, you'd have to install LUKS or eCryptfs or something, but I think it would be worth a try. I expect Windows would only see the encrypted files then.
Might be a good way to avoid this behavior. The default (from the Windows Store) Ubuntu based VM however doesn't use filesystem level encryption, and every folder or file inside the "VM" is available somewhere buried in the Roaming folders.