The "pop up message" that I posted in OP is appearing in Electrum (the real wallet software). It was a bug that was being exploited where the server can return an error message and it showed up like what you see in your wallet. The error message is returned when you send a transaction.
This is actually very concerning since this isn't the first time Electrum as very trusted client has had some issues to work out. Good thing however is that they are pretty quick with patching bugs.
Another clear sign why the Core client is so dominant. It's by far the most secure client out there and people rightfully trust it with everything they have. The only thing is that average joes don't like running a full node client.
Not sure if and when, but if this continues people might lose confidence in Electrum and ditch it for good. It's a shame since it's one of the better SPV wallets available, but you can't endlessly make headlines like this....