I hope this message finds you well, present circumstances excluded. As a matter of course, in Illinois, and most states for that matter, on the civil side, theft is called conversion.
Below is an excerpt description of conversion in Illinois:
Illinois courts have defined the tort of "conversion" as any unauthorized act that deprives a person of his or her property permanently or for an indefinite time. Illinois Jurisprudence, Personal Injury and Torts § 10:01. The essence of a cause of action for conversion is the wrongful deprivation of one who has a right to the immediate possession of the object unlawfully held, or the wrongful deprivation of property from the person entitled to possession. Id. The Illinois Supreme Court held to establish a cause of action for conversion, a plaintiff must prove by a preponderance of the evidence that: (1) the plaintiff has a right to the property; (2) the plaintiff has an absolute and unconditional right to the immediate possession of the property; (3) the plaintiff made a demand for possession; and (4) the defendant wrongfully and without authorization assumed control, dominion, or ownership over the property. Cirrincione v. Johnson, 184 Ill.2d 109, 114 (1998).
As to the issue at hand, in order to be able to deduct the amount lost as to this civil conversion, you are going to have to produce a judgment against the individual relative to the amount converted. Moreover, you will also have to produce documentation of reasonable attempts to collect that have been unsuccessful.
In other words, you are going to have to sue this individual with the cause of action being conversion and get a judgment against him. You will then make an attempt to collect (garnish wages, place a lien on property, etc.). If/when you are unable to collect, you will then be able to file for the tax deduction under the IRS 165 provision.
Let me know if you have any additional questions or comments. I want to make sure you are satisfied with the responses given herein.
Best wishes going forward!