sftp Broken pipe Couldn't read packet: Connection reset by peer

I am trying to setup a sftp account to a specific folder. I have created a group ftpaccess and user testuser with home directory as seen here:

sudo addgroup ftpaccesssudo useradd -d /home/forge/mydomain.com/downloads -m testuser -g ftpaccess -s /bin/falsesudo passwd testusersudo chown root:root /home/forge/mydomain.com/downloadssudo chmod 755 /home/forge/mydomain.com/downloads

Then I have created an transfers directory inside testuser home folder:

sudo mkdir /home/forge/mydomain.com/downloads/transferssudo chown testuser:ftpaccess /home/forge/mydomain.com/downloads/transfers

Then I have setup sshd_config like this (rules added to the end of file):

# SFTP accountSubsystem sftp internal-sftpMatch group ftpaccessChrootDirectory %hX11Forwarding noAllowTcpForwarding noForceCommand internal-sftpPasswordAuthentication yes

Now trying to sftp with this user sftp testuser@localhost but I get error:

packet_write_wait: Connection to 127.0.0.1 port 22: Broken pipeCouldn't read packet: Connection reset by peer

What am I doing wrong?