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What was the bug?
While adding the two payment transactions to the atomic transaction composer, the sender's signer was not passed with the transactions. Instead, the sender's account was passed.
How did you fix the bug?
In order to fix the bug, I used algosdk's makeBasicAccountTransactionSigner method to create a signer from the sender's account. I passed the signer along with the transactions into the atomic transaction composer and voila! it worked.
Console Screenshot: