WSL will start in your C:\Users{user} directory.

Put the file in /home/{user}, then change the permissions.

Here's a working version of Mayur's code

icacls.exe your_key_name.pem /reset
icacls.exe your_key_name.pem /grant:r %username%:(R)
icacls.exe your_key_name.pem /inheritance:r

Your tilde expansion is not pointing your current working directory, where the file is. Use either an explicit or the correct tilde-expanded path:

chmod 400 /home/crane/Downloads/mykey.pem

or

chmod 400 ~crane/Downloads/mykey.pem

To expound on the tilde expansion a bit:

~ means "my home directory". If you're the root user, this is typically /root.

~somebody means "the home directory of the somebody user. This is typically /home/somebody (or, on Macs, /Users/somebody).

When you, as root, use ~/home/somebody, that expands your home directory, and becomes /root/home/somebody.

http://www.linuxnetadmin.com/2013/05/permissions-broken-on-binchmod.html

edit: easy mode fix!

The keys need to be read-writable only by you:

chmod 600 ~/.ssh/id_rsa

Alternatively, the keys can be only readable by you (this also blocks your write access):

chmod 400 ~/.ssh/id_rsa

600 appears to be better in most cases, because you don't need to change file permissions later to edit it. (See the comments for more nuances)

The relevant portion from the manpage (man ssh)

 ~/.ssh/id_rsa
         Contains the private key for authentication.  These files contain sensitive 
         data and should be readable by the user but not
         accessible by others (read/write/execute).  ssh will simply ignore a private 
         key file if it is              
         accessible by others.  It is possible to specify a
         passphrase when generating the key which will be used to encrypt the sensitive 
         part of this file using 3DES.

 ~/.ssh/identity.pub
 ~/.ssh/id_dsa.pub
 ~/.ssh/id_ecdsa.pub
 ~/.ssh/id_rsa.pub
         Contains the public key for authentication.  These files are not sensitive and 
         can (but need not) be readable by anyone.

Well - so you made /usr readable only to root, I guess (if no further changes). More over - you removed "x" by that which made the folder pretty much not accessible. Hence you can't now - as regular user - run sudo, which, if I remember correctly, is in /usr/bin/.

The best idea for now would be to start a system from LiveCD, mount your disk/filesystem and change the permissions back to 755.

And next time to be more careful with this kind of changes ;)