[email protected]:

a(b?: T1): T2 ->
  switch

unknown: Unexpected token (1:4)
> 1 | a(b?: T1): T2 ->
    |     ^
  2 |   switch
  3 | 

The parser is misattributing the syntax error to the function arg list, rather than the body. Removing the return type annotation fixes this and gives the proper syntax error:

a(b?: T1) ->
  switch

unknown: Illegal newline. (2:8)
  1 | a(b?: T1) ->
> 2 |   switch
    |         ^
  3 | 

I have traced the problem to this area:
https://github.com/lightscript/babylon-lightscript/blob/master/src/parser/expression.js#L477

I think the preceding code, when it tries to speculatively parse a function with a flowtype, is encountering an error in the body and eating it/resetting the state. Then because the refShorthandDefaultPos is set, the error appears outside the function body.

No suggested fix yet but I am looking into it.