Tax implications of long term financial advisor fraud

Our family trusted financial advisor that was entrusted with over a million dollars (over the past 10 years) filed for his company and personal bankruptcy earlier this year. He admits sending out false statements to his investors and we do not know nor do we have the ability to determine how long the statements were false. We had over 1.2 million with his company on 1-1-2017 (according to the statement he issued of our account) prior to his filing bankruptcy. As with folks that file bankruptcy as a relief, we are unable to demand details of the monies. Our 1.2 million is gone and the lawyers say that he and his company were “underfunded”. That really means that we will never see the million. It should be noted that those financial advisors that employ this method of fraud realize that they should not reveal financial loses till all of the monies are completely used up. The term “used up” means that the financial advisor has set aside enough monies or prepaid for his personal, company lawyers, legal defense and legal bankruptcy but little or no monies for the trustee to split among those that were his customers. At that point, those they have invested significant amounts may not have enough monies to seek additional civil actions for the damages.

Has anyone else been take and had experience with filing a tax return to reflect the loss. I normally do the taxes but seems like I will need to hire a lawyer and accountant to help with the taxes. Of course, over 95% of my liquid assets are gone, at this point. Since he was a trusted as a member of our extended family we allowed him access to our entire financial portfolio. We even sold life insurance policies because he advised us that it would be better to invest in the market. He was a professional with extensive experience with several major players in the financial markets prior to striking out on his own and starting his own investment company and financial advisory service (LLC).

Yes, the FBI and Federal Attorney General are involved. It may be years before we get answers. Till then, I am still required to file and pay taxes. What is the best way to file the loss on our taxes? I assume the first course of action would be to file for an extension. Although we do not know the exact amount of the loss at this point, it should be near a million dollars.

REF: FBI case 318B-CO-2146047