What do you mean by "encrypted FTP"? Did you mean that you are using SFTP instead?
Are you starting fail2ban as root? Try increasing the loglevel in the fail2ban configuration. That should give you soem more ifnromation on that error.
To stop the attacks, you could change the port that FTP is listetning to. Alternatively, you could use iptables to limit FTP connection rates to no more than 2 in a certain time, say 10 minutes:
Code:
iptables -I INPUT -p tcp --dport 21 -i eth0 -m state --state NEW -m recent \
--set
iptables -I INPUT -p tcp --dport 21 -i eth0 -m state --state NEW -m recent \
--update --seconds 600 --hitcount 2 -j DROP