Similar issue here, but the file needed to be in /config/nginx/

So, basically, steps were:

1.) Look for logs/log location Located in /config/log/nginx/error.log

2.) See error where failed login attempt was looking for .htpasswd file in /config/nginx

3.) moved existing .htpasswd file to that location For me 'mv /var/www/html/.htpasswd /config/nginx/.htpasswd'

4.) Restart swag

5.) ???

6.) Profit!