When is Darth Malgus both alive and dead? When BioWare decides to share with the community, of course. During the San Diego Comic Con story panel, BioWare showed off some concept art of Malgus in carbonite. Then they followed it up with a CGIp clip of him being brought in by the brothers.
While there was mostly rejoicing, BioWare had to step in and make things difficult. Charles Boyd, a SWTOR writer tweeted:
@IanYamagata @Rach_Games let's all remember, that was cut ;) just showing behind the scenes concepts.— Charles Boyd (@Charles_Boyd) July 12, 2015
That's disappointing, but not really a denial that he is in the game. It makes sense that it was cut as it wouldn't really fit in the Sacrifice trailer.
However, why would they go through the effort of making it if Malgus was somehow not involved with Fallen Empire? It's not like it was 5 minutes of work.
Also, I can't believe someone would have thought it was a good idea to show something like this just to say it is not in the game. They know people would get excited.
That being said, there could be any number of explanations. Maybe Malgus in carbonite is just a trophy in the Emperor's room. We might see it, but never interact with it. Maybe Malgus gets released at the end and is involved in Season 2? Maybe we get him as a Stronghold decoration?
I hope he is in the expansion. If he's not, it isn't a big deal though. He's just the cherry on top.