Cannot create encrypted library

I tried to create a new encrypted library using the default settings (sparse image, 128-bit encryption) and get the following error:

EncryptedLibraryCreationError: 1: hdiutil: create failed - Inappropriate ioctl for device

This is on a OS X 10.10 Yosemite machine. Any suggestions?

This seems to be due to a bug in Yosemite. While I try to find a workaround, you may be able to create the encrypted disk image using Disk Utility’s File > New > Blank Disk Image command. Then tell EagleFiler to create a non-encrypted library on the mounted disk image.

EagleFiler 1.6.3 works around the OS bug that prevented this from working on Mac OS X 10.10.