This blog here points out how to fix this problem.
http://www.mikestechblog.com/joomla/operating-systems-section/operating-systems-ubuntu/155-500-oops-vsftpd-refusing-to-run-with-writable-root-inside-chroot.html
The issue being that the user’s root directory is writable. The Frontier Group provides you with a fix on vsFTPd.
Here are the steps to be taken (copy paste from the tutorial, in case the link dies)
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login as root (or sudo..) and do the following:
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vi /etc/vsftpd.conf and add the following
allow_writeable_chroot=YES -
sudo service vsftpd restart