Bitinstant started off as a legitimate service, which of course is why everyone has given them so much slack.  But something either catastrophic or nefarious has happened over there, and it is quite apparent that they don't have a way to stop it from careening over the cliff.  Having watched a few of these things unfold in the real world, whomever is left over there that has clean hands needs to go into self-preservation mode.  Take the reigns, come clean publicly about what has happened, cooperate with any resulting investigations, and either take the company into bankruptcy or find investors willing to stop the bleeding. You don't want to go down with this ship.  The jig is up.

This would certainly be the most innocent explanation.  However, for a service that promised BTC in a few hours, I'm not sure why they would ever sell more BTC than they had on hand plus the amount that they could buy in realtime to settle the transaction.  Surely one of the key design aspects of a system like this would be to make sure that under no circumstances were they taking on trading risk for even a single transaction.  They are a processing company, not an arbitrage company.  I can't imagine that they wouldn't have it programmed so that it automatically stopped taking orders for BTC the moment that they crossed into this territory.

So for those reasons, I still think there is a lot more to the story (the simple fact that they have been lying and have left us to speculate, points to much deeper issues as well).