This is basically because credentials is not correct !!
May be this will help you !!
535 Authentication failed. Restarting authentication process.
If a SMTP client authenticates but the username or password is incorrect, or the account is disabled, hMailServer sends this error message to the client.
http://support.qualityunit.com/156325-Email-is-not-sent-because-of-failed-authentication
SMTP error 535 authentication failed in roundcube
SMTP Error (435): Authentication failed
If you face SMTP error 535 Authentication Failed while sending an email from round cube, then you can check the following things.
[root@server1 ~]# vi /usr/local/cpanel/base/3rdparty/roundcube/config/main.inc.php
and changed
$rcmail_config['smtp_user'] = ‘%u’;
to
$rcmail_config['smtp_user'] = ”;