I know that using Erase all Contents and Settings destroys the encryption key, securely wiping your data, but does simply doing the restore through iTunes then setting it up as a "New iPhone" do the same thing?

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Yes, as long as the iPhone is returned back to non-activated state, all contents are erased with no trace. The iPhone is returned back to non-activated state during both "Erase all Contents and Settings" and iTunes set up as new iPhone.

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