I've been sitting and watching for a while and the best deal I have seen lately are factory M16s for $5600. If I could find one for $4000 I would get it, but they just aren't out there. Your friend got really lucky, or the rifle is in really poor shape, and I hope its the first one.
Every once in a while you will run into someone who has been out of the loop for a few years and has not kept up with MG prices lately. If you could pick up some transferables at '96 prices they would be a steal today. While they are out there, they are really hard to find. Net access is too easy these days and too many people know the going rates for MGs to find any great deals and they usually get snapped up pretty fast like what your friend did.
Hell, thinking back....I wished I would have bought into the market just a couple of years earlier than I did. Just three years ago you could find $4000 M16s and $600 MACs all over Bowers board. The best deal left today is a NIB Vector UZI, while they still last.
Michael