Aliens are smart enough to access the inventories of my PSI-Weak soldiers I'm using as bait, apparently. Greco, a high ranking soldier, suddenly started getting psi-attacked. He pulled out a zero primed high explosive from his belt(wasn't in his hands)and threw it into the nearest group of soldiers. At this point, I'd say 1/2 of my team was already killed before this. The High Explosive made it worse.
The remaining few survivors panicked at the death of a high-ranking soldier(Didn't want him to be a Rear Commander since he doesn't have a PSI Amp or Blaster Launcher yet. I kept him behind everyone else.) and were easy targets. The only survivors were the Scout Drone and a Laser HWP.
Excellent move, OpenXCOM AI. You win this round.