Same problem here. I get this message two times before it tries to mount
my partition:

> Enter LUKS passphrase: Command failed: error reading passphrase

Init/upstart offers me to enter root-pw to login, but even with this
login I get the same error. After boot is completed I can log into a
console and start cryptsetup.

Is there any workaround yet? It annoys me to log into a console and
restart /etc/init.d/cryptdisks manually each reboot.

-- 
Upstart doesn't activate luks volumes in cryptsetup
https://launchpad.net/bugs/62751

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