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Issue: Authentication to use the FTP service on Snow Leopard Server fails with every user. Restart of service and server do not resolve issue. AUthenticating with other services are fine.

Resolution: Appears the file “ftpaccess” is corrupted. Replace with default ftpaccess file:

Stop the FTP server
sudo cp ftpaccess ftpaccess_bak
sudo cp ftpaccess.default ftpaccess
Start the FTP server

Link: FTP Server won’t allow access anymore – Apple Forum