Since openssh 4.x does not support chroot via sftp, we need to upgrade openssh on the server in the following manner indicated below if your running plesk,in order for you to be able to jail subdomain users via sftp. (this works with plesk 9 and 10), however in plesk 10 the subdomain user no longer has httpdocs folder and you need to manually re-create this for this fix to work.

1. You have remove the openssh packages currently installed without breaking the plesk dependancies(do not use yum remove)

#rpm -e –nodeps openssh*

2. Next install openssh5 which support chrootdirecorty via sftp run the following
wget http://fs12.vsb.cz/hrb33/el5/hrb-ssh/stable/x86_64/openssh-5.1p1-3.el5.hrb.x86_64.rpm
wget http://fs12.vsb.cz/hrb33/el5/hrb-ssh/stable/x86_64/openssh-askpass-5.1p1-3.el5.hrb.x86_64.rpm
wget http://fs12.vsb.cz/hrb33/el5/hrb-ssh/stable/x86_64/openssh-clients-5.1p1-3.el5.hrb.x86_64.rpm
wget http://fs12.vsb.cz/hrb33/el5/hrb-ssh/stable/x86_64/openssh-server-5.1p1-3.el5.hrb.x86_64.rpm

To install new openssh rpm’s
-#rpm -Uvh openssh*
Here are the unofficial openssh5 rpms for CentOS5 and RHEL5 :
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http://fs12.vsb.cz/hrb33/el5/hrb-ssh/stable/i386/
http://fs12.vsb.cz/hrb33/el5/hrb-ssh/stable/x86_64/
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updated sshd_config with the following lines below and start ssh, if you restart ssh you will loose the shell window, because the server will try to restart the ssh daemon you just uninstalled. If you just start ssh, it will start the new daemon, and you should maintain the current shell window.
http://www.techrepublic.com/blog/opensource/chroot-users-with-openssh-an-easier-way-to-confine-users-to-their-home-directories/229
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# override default of no subsystems
Subsystem sftp /usr/libexec/openssh/sftp-server

#Subsystem sftp internal-sftp
Match Group sftp
ChrootDirectory %h
ForceCommand internal-sftp
AllowTcpForwarding no
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2. add the group sftp by running “groupadd sftp”

3. login into plesk
-create subdomain, ensure you create the secondary ftp account under the subdomain
-check to see that ftp works on 21 if applicable

4. For SSH to work for the secondary user (non jailed)
copy var, usr, tmp, lib, etc, dev, bin
cp -R /www_data/superman.com/var /www_data/superman.com/subdomains/clarkkent
http://forum.parallels.com/showthread.php?t=73191

5. To Jail the users via SFTP into their homedirectory(note this disables the ability to shell in via the secondary user via shell and only allows sftp)
-# usermod -G sftp test2
-# usermod -s /bin/false joe
-# chown root:root /www_data/superman.com/subdomains/clarkkent(the directory you want to jail needs to be owned by root in order to chroot via sftp up to
the parent directory, inside the end directory joe can own the files in this example.)
-# chmod 0755 /www_data/superman.com/subdomains/clarkkent
http://www.techrepublic.com/blog/opensource/chroot-users-with-openssh-an-easier-way-to-confine-users-to-their-home-directories/229