Following is directly from the developer, Sebastian M. : (hope this helps somebody who has the same question)
tldr;> This can happen due to how CryFS works, but should be much
better in the upcoming 0.10 release series. You can also improve it
when using a 0.9.x version by changing the block size of your file
system.
Background: CryFS 0.9.x allocates all data in blocks of 32kb by
default. Even if you have very small files, each file needs at least
one block and will need at least these 32kb of space. This is done,
because CryFS uses this to hide the file size. You can read more on
why this is important in the second paragraph here:
https://www.cryfs.org/comparison#encfs There is a security proof in
the CryFS paper that attackers cannot find out your directory
structure or how large your files are from seeing the encrypted file
system.
But unfortunately, this means that in scenarios where you store a huge
number of tiny files, the bloat can be quite a lot. In 0.10.x, the
default was changed to using 16kb blocks, so the bloat should be much
smaller. However, you don't need to wait for that. When creating a
file system, you can choose the block size. Choosing a smaller block
size will reduce the binary bloat (you can try going down to 4kb), but
might make the file system a bit slower when accessing large files.