NewImgCreate with imagecreatefromstring failed

[Actlas]

When I set all media url's to the /product/ folder (It's easier to have all images in 1 location for me), I receive the error "NewImgCreate with imagecreatefromstring failed" for all images I try to import.
The images appear in the media manager but no images are available when I try to select an image for a category or product.

Code Select Expand

Synchronized 264 media for product in directory images/stories/virtuemart/product/
Synchronized 264 media for category in directory images/stories/virtuemart/product/
Synchronized 264 media for manufacturer in directory images/stories/virtuemart/product/
Synchronized 264 media for vendor in directory images/stories/virtuemart/product/
Synchronized 0 media for forSale in directory /home/skytunec/domains/skytune.com/public_html/dev/log/extra-safe/
Synchronized alltogether 1056 files
Img2Thumb NewImgCreate with imagecreatefromstring failed /public_html/dev/images/stories/virtuemart/product/myimage_1210.jpg

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When I set the folders back to their defaults everything is ok again. Is there a way to store al images in 1 folder? Now I have to copy images I use both for categories as for products...