This can be complicated. When did you receive the money? Did you receive information that describes what the settlement is for, specifically?
You state the advisor made unauthorized trades. For purposes of this discussion I'm assuming you reported gains/losses on the trades...even if unauthorized?
Generally speaking, funds received as awards, punitive, etc., are taxable. Generally, the major exception is if the funds are related to medical situations (physical and sometimes mental).
Thus, without details, I would have to say the funds are taxable, unless they would meet some specific exception.
**Disclaimer: Effort has been made to offer correct information; but due to the discussion forum limitations, the poster disclaims any legal responsibility for the accuracy of the poster's response**