I recently bought some Formula RXs off ebay, with the description of "Need a bleed".
Sure enough, installed them, and I could pull the rear lever back all the way to the bars, and nothing happened to the pads.
I dug out my trusty formula bleed kit (I've bled formula's and Avid's before without any issues) and tried to push through some new dot 4 through the system. I couldn't. It felt like there's a blockage somewhere. I collected some of the fluid in the caliper housing by pulling on the syringe and the stuff that came out looks suspiciously like mineral oil (Top layer).
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Is it possible that the previous owner has bolloxed the seals by using mineral oil, and they've blocked the system somewhere?
well there's definately two different types of oil in there, so even if it's not mineral, it's something the brakes don't like. Looks likes you're in for an expensive rebuild, hope they were cheap!
meanwhile...Panaracers? very retro... 😀
I really can't see that it could be anything else apart from epic on the part of the previous owner. The seals will all be bolloxed.
My understanding is that dot 3, 4 and 5.1 will mix happily. Give it a shake, of they separate, it's not a compatible fluid and every soft part in there is banjaxed.
looks like reverb fluid to me
Or genuine Shimano Mineral oil 🙁