Exchange SMTP Loop Detected

We are using an Astaro/Sophos spam detection appliance and are experiencing a problem sending mail to our Exchange server. Everytime a message comes through to a non-existent email account, the Exchange server gets stuck in a loop with the Sophos device. The Exchange server has an error message which says "Local loop detected" but the Sophos device does not detect any errors. It just keeps trying to send the message until the queue gets so full (more than 60,000 messages this past weekend) that it can't function anymore. We had been using this same Sophos device with a more generic SMTP server in the past but the recent change to Exchange has been causing this problem. The old mail server just caused the Sophos device to bounce the messages, Exchange can't seem to do that. What is causing this loop and how do we stop this from happening?