can someone summarize Bitcoinica's situation?

Your funds are quite totally safe, don't panic
Hey, I take offense at that! Here in the Netherlands we live like that, and we're perfectly fine with it!
We just teach our children to swim!
Edit: Wooden shoes float.
I second this sentiment! Have seen water just below the dykes with the house I lived in on the other side, near-floods will make a man out of you...