Restore of copy_only backup of encrypted database made without FORMAT but with INIT fails
This is indeed a bug in SQL Server. We (@sepupic and I) had some discussions offline and managed to narrow down the circumstances: The error occurs when:

You use TDE
The backup is compressed
You specify COPY_ONLY
You specify INIT
The backup file exists

Repro:
--The database has TDE
--Backupfile doesn't exist at this stage

BACKUP DATABASE db1Encrypted
TO DISK = 'R:\db1Encrypted.bak'
WITH INIT, COPY_ONLY, COMPRESSION, CHECKSUM

--backup file 660 kb

RESTORE VERIFYONLY FROM DISK = 'R:\db1Encrypted.bak' WITH CHECKSUM
--OK


--Backupfile now exists, below causes unreadable backup

BACKUP DATABASE db1Encrypted
TO DISK = 'R:\db1Encrypted.bak'
WITH INIT, COPY_ONLY, COMPRESSION, CHECKSUM

--backup file 3890 kb

RESTORE VERIFYONLY FROM DISK = 'R:\db1Encrypted.bak' WITH CHECKSUM
--Fails &quot;The media family on device 'R:\db1Encrypted.bak' is incorrectly formed&quot;