Sounds very fishy.
If you had it encrypted, any ideas on how it was stolen?
If you're being honest, I'm terribly sorry for your loss. That stinks.
Yea, it does. I had /backups/ encrypted, I should have been clear. Any virus/trojan/person could have just coppied the wallet file from %appdata%/bitcoin.
Encryption cannot protect wallets in use, because your legitimate client has to decrypt it anyway. Encryption is good for backups only.