Here is what I know so far.
This is the pattern that has become obvious with 72+ hours of trial and error.
1. API Login + Local Hosted Bot (Local IP/Home IP)= SUCCESS
2. Web/App Direct Login + ANY PROXY (Any freaking proxy) = SUCCESS
3. API Login (Server hosted bot) + Proxy of ANY SORT (Any freaking proxy) = FAIL
Here is other 'fixes' that I've seen repeatedly.
1. Wait and relax. It worked for me like a miracle. Still logged in for 6+ hours on Follow Liker and on custom bot with multiple accounts. No idea how it is working again. But it is.
2. This issue is affecting more people than you can imagine.
http://downdetector.com/status/instagram
As you can see 38% people have log-in issues. So imagine that.
3. Some people are having success with using Fake User Agents. If you know what that means - then deploy it. It can help.
4. Others are having success with using residential proxies. If you have a solid supplier for static residential IP then give it a try.
5. Most of the SMM panels I know have already fixed this issue. Obviously. If they are smart enough to manage 500,000+ Instagram accounts then they can beat almost every bug / update Instagram has.
My suggestion - Lets wait a day or so and see if it goes away. This has happened an year ago. It kind of fixed itself. There is thread on BHW about it.
There is ONE final fix that is pretty complicated but I know it will solve the issue. I am coding on it. If it works - I will share in detail on what I did. And no - no need to pay and shit. DO NOT PAY ANYONE. These scammers love when people panic - they make money in such times. So chill. It will be alright.