SMTP token authentication returns 535 5.7.3 Authentication unsuccessful after renewing token

Question

Our existing Azure application secret expired on 21/12, at which point sending email from our app using SMTP ceased to work as expected. We created a new secret and obtained a new refresh token. After updating the app with new secret/token, we are now constantly receiving error 535 5.7.3 Authentication unsuccessful.

After searching the web, we checked all configuration options possible to no avail, however there's no apparent reason why it would not work as no configuration changes were applied since secret expired.

Nevertheless, we checked the following:

• Account is granted Authenticated SMTP
• MFA is disabled for that user

SMTP AUTH is NOT turned off for our organization

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Security defaults are disabled (they were enabled before and were not preventing us from sending email with that account), disabling does not make any difference with this issue

This is a mission critical feature and we would appreciate any help in solving this asap.