Barracuda – Outbound SMTP Host/Smart Host in Build 3.5.12.012
When upgrading from a build older then 3.5.12.012 to a build 0.12 or above, you should pay attention to the Outbound SMTP host/Smart host configuration. This picture below shows the configuration option.
The release notes tell the following:
Fix: Now honors outbound BASIC > Administration > ‘SMTP host/Smarthost’ for mail delivery when relaying (recipient domain is not on the box). Before this, the system would only deliver quarantine messages and bounce messages to the smarthost. 
When upgrading to firmware version 3.5.12.012 or higher a number of customers have been caught out by a change in the operation of the SMARTHOST setting. This option was used just to route notifications and reports from the Barracuda. On the new firmware, if you have anything entered in the smart host field ALL outbound mail will be forwarded via it.
Multiple customers entered the internal mail server in the field to deliver the notifications and reports. After upgrading the customers weren’t able to send mail. Of course the reason is simple, all outbound mail is trapped in a loop.
The internal mail server sends the mail to the Barracuda and the Barracuda, like the smart host specifies, sends the mail back to the internal mail server. You have to clear the smart host field, unless you implicitly need to use it.
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