Update - 2024

I have had crazy problems getting this thing set up, when I rebuild, for the following stupid reasons:
  1. Copying and pasting instructions which contained an error - a typo, basically - cost me a ton of time every time I tried to set this up! I'd quickly scratched out some instructions, awhile back, which alternately said to add the group "sftpusers" and then continued with more copy and paste stuff in which - instead of using the group name "sftpusers" - I'd left off the letter "s" and was using "sftpuser". Specfically, in an edit to the sshd_config file I believe I was using "sftpuser" which, of course, was referring to a non-existant group and causing things to not work.

    So, we're going to be using "sftpusers" - with the s. It was an idiotic mistake that came with copying and pasting an error.

  2. I had a variation on the following command but it would not work because it would always say that the user id was involved in a process - use the following, this is big:

    sudo usermod -aG sftpusers guy

    The above adds user guy to the sftpusers group. Now, let's check and make sure that guy is a member of this group - run the following from a terminal:

    groupmems -g sftpusers -l

The Process Which Works

Edit the bottom of the /etc/ssh/sshd_config file to look like this: 
# override default of no subsystems
#Subsystem	sftp	/usr/lib/openssh/sftp-server
Subsystem       sftp    internal-sftp


# Example of overriding settings on a per-user basis
#Match User anoncvs
#       X11Forwarding no
#       AllowTcpForwarding no
#       PermitTTY no
#       ForceCommand cvs server

# tail /etc/ssh/sshd_config
Match Group sftpusers
ChrootDirectory /sftp/%u
ForceCommand internal-sftp

For archival purposes - shit which did not work

Below are the instructions I had, at one time, for editing the bottom of sshd_config. I had saved this, originally - which is significantly different than the above code which works.

#Subsystem      sftp    /usr/lib/openssh/sftp-server
Subsystem       sftp    internal-sftp


# Example of overriding settings on a per-user basis
#Match User anoncvs
#       X11Forwarding no
#       AllowTcpForwarding no
#       PermitTTY no
#       ForceCommand cvs server

# tail /etc/ssh/sshd_config

Match group sftpuser
ChrootDirectory /home
X11Forwarding no
AllowTcpForwarding no
ForceCommand internal-sftp

While similar to the above noted command (which worked) for adding a pre-existing user to a group my old instructions suggested the following - which did not work.. saying something about the user's ID being held by a process. So, this is close but no cigar.

sudo usermod -a -G sftpuser guy