He can write off his losses completely over time. Your tax laws allow you to siphon your losses over time until they’ve been completely absorbed.
Well if it was categorized as income, I think the write-off limit is $3000 a year so it will take 10,000 years. If it was a capital loss, he could write it off faster.
I guess he could probably argue it was fraud and not count it as income. Or, if he planned it right from the start it was never income and was instead an investment which he could then write off as a capital loss.