by Matteo Scaramuccia.
Hi Werner,
it is actually encrypted but you're reading the SMTP conversation from what the client is sending and receiving, so plain text here.
What I - and the code - expect is to read about the capabilities of the SMTP server, for example if you look at the end of https://www.ndchost.com/wiki/mail/test-smtp-auth-telnet you'll see that, there, the server is replying something like:
...
250-AUTH PLAIN LOGIN
250-STARTTLS
250 HELP
...
That line tells you that the SMTP server is able to authenticate using a LOGIN scheme. If you look in the Internet you'll find more example e.g. http://www.samlogic.net/articles/smtp-commands-reference-auth.htm .
If I look at your trace I found no mention about the AUTH capabilities: that's the reason why I was wondering if something changed at the SMTP side, meanwhile you updated the Moodle instance.
HTH,
Matteo