Looks like you need to specify the target_type.

It should get the default from FileItem::defaultStorageSettings(), I am not sure why that doesn't work.

Unrelated, but note that you should not call t() like that, as it makes it impossible for potx to extract translatable strings from your code. Also, watch out for https://www.drupal.org/node/2363099, you need to update it to use nt() then.

Edit: Turns out, the problem is that the code was using setSettings(), which is considered problematic because it replaces all existing settings, including defaults. Switching to setSetting() for specific settings should solve it.