[ONE Original Android Development] updateing:
Grabbed some logs, and discovered that this was caused by MultiROM (code path did not reach my hacked libcryptfs_hw):

int cryptfs_isConvertibleToFBE()
{
struct fstab_rec* rec = fs_mgr_get_entry_for_mount_point(fstab, DATA_MNT_POINT);
int i=0;
SLOGD("cryptfs_isConvertibleToFBE got data mount point, rec is at %p, fstab is at %p", rec, fstab);
for (i = 0; i < fstab->num_entries; i++) {
SLOGD("cryptfs_isConvertibleToFBE Dump entries: %d", i);
SLOGD("%s", fstab->recs[i].blk_device);
SLOGD("%s", fstab->recs[i].mount_point);
SLOGD("%s", fstab->recs[i].fs_type);
SLOGD("%s", fstab->recs[i].fs_options);
SLOGD("%s", fstab->recs[i].key_loc);
SLOGD("%s", fstab->recs[i].label);
}
return fs_mgr_is_convertible_to_fbe(rec) ? 1 : 0;
}

08-30 19:32:26.524 218 230 D VoldCryptCmdListener: cryptfs isConvertibleToFBE
08-30 19:32:26.524 218 230 D VoldCryptCmdListener: cryptfs isConvertibleToFBE Dump finished
08-30 19:32:26.524 218 230 D Cryptfs : cryptfs_isConvertibleToFBE got data mount point, rec is at 0x0, fstab is at 0xa7d18d60
08-30 19:32:26.524 218 230 D Cryptfs : cryptfs_isConvertibleToFBE Dump entries: 0
08-30 19:32:26.524 218 230 D Cryptfs : /dev/block/platform/msm_sdcc.1/by-name/persist
08-30 19:32:26.524 218 230 D Cryptfs : /persist
08-30 19:32:26.524 218 230 D Cryptfs : ext4
08-30 19:32:26.524 218 230 D Cryptfs : barrier=1,data=ordered,nodelalloc,nomblk_io_submit,errors=panic
08-30 19:32:26.524 218 230 D Cryptfs : (null)
08-30 19:32:26.524 218 230 D Cryptfs : (null)
08-30 19:32:26.524 218 230 D Cryptfs : cryptfs_isConvertibleToFBE Dump entries: 1
08-30 19:32:26.524 218 230 D Cryptfs : /dev/block/platform/msm_sdcc.1/by-name/boot
08-30 19:32:26.524 218 230 D Cryptfs : /boot
08-30 19:32:26.524 218 230 D Cryptfs : emmc
08-30 19:32:26.524 218 230 D Cryptfs : (null)
08-30 19:32:26.524 218 230 D Cryptfs : (null)
08-30 19:32:26.524 218 230 D Cryptfs : (null)
08-30 19:32:26.524 218 230 D Cryptfs : cryptfs_isConvertibleToFBE Dump entries: 2
08-30 19:32:26.524 218 230 D Cryptfs : /dev/block/platform/msm_sdcc.1/by-name/recovery
08-30 19:32:26.524 218 230 D Cryptfs : /recovery
08-30 19:32:26.524 218 230 D Cryptfs : emmc
08-30 19:32:26.524 218 230 D Cryptfs : (null)
08-30 19:32:26.524 218 230 D Cryptfs : (null)
08-30 19:32:26.524 218 230 D Cryptfs : (null)
08-30 19:32:26.524 218 230 D Cryptfs : cryptfs_isConvertibleToFBE Dump entries: 3
08-30 19:32:26.524 218 230 D Cryptfs : /dev/block/platform/msm_sdcc.1/by-name/misc
08-30 19:32:26.524 218 230 D Cryptfs : /misc
08-30 19:32:26.524 218 230 D Cryptfs : emmc
08-30 19:32:26.524 218 230 D Cryptfs : (null)
08-30 19:32:26.524 218 230 D Cryptfs : (null)
08-30 19:32:26.524 218 230 D Cryptfs : (null)
08-30 19:32:26.524 218 230 D Cryptfs : cryptfs_isConvertibleToFBE Dump entries: 4
08-30 19:32:26.524 218 230 D Cryptfs : /dev/block/platform/msm_sdcc.1/by-name/modem
08-30 19:32:26.524 218 230 D Cryptfs : /firmware
08-30 19:32:26.524 218 230 D Cryptfs : vfat
08-30 19:32:26.524 218 230 D Cryptfs : shortname=lower,uid=1000,gid=1000,dmask=227,fmask=337
08-30 19:32:26.524 218 230 D Cryptfs : (null)
08-30 19:32:26.524 218 230 D Cryptfs : (null)
08-30 19:32:26.524 218 230 D Cryptfs : cryptfs_isConvertibleToFBE Dump entries: 5
08-30 19:32:26.524 218 230 D Cryptfs : /devices/platform/xhci-hcd*
08-30 19:32:26.524 218 230 D Cryptfs : auto
08-30 19:32:26.524 218 230 D Cryptfs : auto
08-30 19:32:26.524 218 230 D Cryptfs : (null)
08-30 19:32:26.524 218 230 D Cryptfs : (null)
08-30 19:32:26.524 218 230 D Cryptfs : usbdisk

There is no /data mount point, so fs_mgr_is_convertible_to_fbe() freaks out due to rec=0... I think MultiROM removed /data in fstab in order to get full control over the mount points, but it does not realize it caused bug...