Put the winner on your Blocked Bidder List and make a copy of that email with headers.
Of course you cannot give your underbidders information to some perfect stranger. You can however offer to send your winner's information to the underbidder, who can then contact him if he wishes. (And I bet the winner will refuse this as an invasion of his privacy. Did I mention Blocked Bidder List?)
Offer to cancel the transaction. While Mutual Cancellation is an option, it is too dangerous with upset bidders. If he has not paid within 4 days (96 hours) go for the Unpaid Item Dispute .
Explain to the winner how proxy bidding works. Basically, the underbidder placed a single high bid, and the winner chased the underbidder until his own 35th bid surpassed that of the underbidder.