The latest upgrade on Ubuntu 12.04 updates vsftpd to version 2.3.5 and they have made a change that requires the chroot directory to no longer be writable which produces this error when trying to connect. They have made an option called allow_writeable_chroot=YES in the latest build that had to be backported to use this functionality.
To fix this, install this custom vsftpd package I found here.
sudo add-apt-repository ppa:thefrontiergroup/vsftpd sudo apt-get update sudo apt-get install vsftpd