When you send cash via MG to zipzap, BitInstant is notified, and then on BTC-e (where BitInstant has "reserves"), they use the funds of the reserves in the process of getting you your bitcoins (*though they quote you MtGox bitcoin prices, which are greater than BTC-e's)... The cash you send them does not actually buy anything (at that time), I don't think BitInstant even gets that cash until a week or a month, or whatever, later.

The problem so far is BitInstant BTC-e reserves are non-existent. They've not been replenished for a long time now. So until you see some serious "Reserves" amounts listed at https://btc-e.com/ (reserves are at $33 USD right now), I think BitInstant has to perform "manual" transfers which don't involve the reserves, but some other account that has bitcoins or USD (how much that account has I don't know).

I'm also getting the feeling that for this to happen you have to contact BitInstant support, or they'll just wait and wait and sit on it - until more reserves are deposited at BTC-e and their system can try again. I'm also getting the feeling that a lot of people's transactions are falling through the cracks.

Either way, I was hoping to use BitInstant a second time, but there seems to be too many issues around everything (exchange problems, reserve problems, DDoS, hackers, poor/slow service, fucked up level of little to no information, etc). And those issues keep happening over and over.

If I had to guess at what's happening, BitInstant doesn't have enough money to perform all the transactions, and they are now waiting on ZipZap to pay them... The issue here is that you can get into a situation where you get so far behind and appart (you have a bunch of growing incomplete past transactions, and too little new money coming in to cover them), that at some point you can no longer do business (too many debts/liabilities that can't be paid off in 12 months) and you have to (by law) file for bankruptcy. And unless there are assets to be seized and re-distributed, everyone looses their money.