You are correct re: exchange arb and gox, but it worked the other way around. Gox dollars were illiquid but BTC was liquid (until BTC withdrawals started failing just before collapse). So Gox had a higher BTC price than anywhere else.

Problem was, if you thought you were selling BTC -> USD you were wrong, you were selling for GOX-USD which were known to be worth much less than USD. In fact, they turned out to be worthless.