Your question has several issues: 1) whether it is investment, capital loss, or 2) whether it is theft, and 3) when is the timing to report the loss.
These aspects are very important to be evaluated especially if the loss amount is large.
Usually, to recognize the loss, unless it is business loss, especially when it is casualty loss, the year you realize the loss is final, is the year to recognize the loss.
Because you are still in litigation, it does not seem that you can recognize the loss in 2016.
This situation is more likely a theft loss. It should be reported on Schedule A, line 20. The loss is recognized as regular income (loss) and not capital loss which is subject to (3,000) per year. Theft loss is handled as Net Operating Loss which can be carried backwards and carried forward. It is much beneficial tax treatment.
Even if you would like to use the amount or part of it for 2016 profit, the suggestion here is not to do it. It does not seem qualify for two reasons. One is that the loss is not final; the other is that it is not a capital loss. Of course, if you would like to treat it as capital loss, it is fine. But it does not seems to be in 2016.
The website links below are for your further references.
Fiona Chen, MPA, Ph.D., CPA, ABV, CFF, CITP, IMTA