I can confirm this behavior. On my XT1034 using Cyanogenmod 11.0 M5 I experienced the same results as Dark Darth. I used TWRP 188.8.131.52-falcon for the test. This bug is not listed in the "known issues" page for the ROM: "Known_Issues_page_for_falcon"
Here are some others who have had the same problem: "88973-moto-g-cm11-encryption-failed"
(Sorry, I can't post outside links. Just do a search for the quoted terms above to get the pages I'm referencing.)
How are bug reports filed? Is dhacker29 aware of this issue?
As far as I know there is no way to get encryption working on Cyanogenmod on the Moto G at the moment.