fatal: bad ownership or modes for chroot directory
You may also have searched on Google for what to do about it and come away with very little useful information.

Well no more! I did the same thing and got bored of reading mailing list posts, so read the source code instead. The relevant section is in session.c:

if (stat(component, &st) != 0)
fatal(“%s: stat(\”%s\”): %s”, __func__,
component, strerror(errno));
if (st.st_uid != 0 || (st.st_mode & 022) != 0)
fatal(“bad ownership or modes for chroot ”
“directory %s\”%s\”",
cp == NULL ? “” : “component “, component);
This is quite simple really, it’s stat()ing the directory specified for “ChrootDirectory” and all its parents up to / and checking that they are:

owned by root
not group or other writable
(it also checks they are actually directories, but I’m going to assume you’re not stupid enough to try and chroot into a file )
Note my emphesis that these checks apply to the chroot directory itself and its parents and /, so if you are chrooting users into /srv/chroot/ then you need to ensure that /, /srv and /srv/chroot are owned by root and not writable by the group (even if it’s root, bizarrely) or other users.

Adopted from : http://www.tenshu.net/archives/2008/10/09/openssh-51-chrootdirectory-permissions-issue/