This presents a problem, because the difference between a theft and a failed business is complicated. Losses due to theft are not deductible for 2018-2025. Losses due to failed investments are a capital loss, they are listed on schedule D, and you can deduct up to the amount of your capital gains, plus $3000 per year, with the balance carried forward. So it might be a good idea to liquidate some capital gains so you can use the loss to offset the taxes, but be careful of the wash sale rule when buying new investments.
So it is to your disadvantage to emphasize the fraud, convictions, and DOJ involvement. You want this to be a business that was mismanaged, and maybe that resulted in some charges, but you don't want this to have been a fraud from the beginning.
Then, the amount of the capital loss depends on your basis. This may be hard to determine, especially if you have been getting payments. Suppose you invested $50K, you never got a payment, and the annuity on paper was worth $100K. Your loss is $50K, the amount you invested, regardless of the value on paper. However, suppose you invested $50K, you received $1000 per month, and the value on paper is $100K. Your loss is less than $50K, because you got some of the principal back, but how much principal you got back included in those payments might be hard to calculate.
You also have to figure the state guarantee payment. If you invested $50K, the value on paper is $100K, and the guarantee payout is $60K, you don't even have a loss, you have a small gain, that is taxable, even though it is less than you expected.
Bottom line, you can only deduct what you invested, or what is left of what you invested. You get no deduction or tax break for money that you were never paid, because you never paid taxes on the income, and you can't deduct something from your income that is not part of your income in the first place.
I think you should talk to a CPA to determine your basis and actual amount of loss.
