i agree with all the folk saying get it replaced.
but so that we understand. the area that windows says is corrupt is the area where kobo stores the books & the database stuff. the firmware is on a different partition? and is also in a protected area on the device from where it it restored at factory reset ?
so
1> formatting the drive followed by factory reset is a possible repair route, valid say for an out of warranty device. Sometimes when a drive is formatted and disc-checked, the bad sectors are flagged & the rest of the drive is useable.
2> it is likely that there IS drive corruption ( windows does not usually lie about these things) but its not yet affecting the part of the drive which Kobo is currently using, because the OP can still download & read books ?
3> any such drive shoudl be formatted to what - FAT32 ? or NTFS ?
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