It has since been relaunched for some users, and will be opening up to more over time. In a post about the first day of CloudOn's public availability, the company shares some additional information about its privacy and security policies.
From a security standpoint, none of your files are stored permanently on any of our systems. Your files are pulled only when you need them. Once you’ve finished editing them, they are saved back to Dropbox and wiped from our systems. We encrypt your credentials and also have 256-bit encryption between our servers and your client. We take pains to audit our security processes and improve them on a regular basis.