We had the same thing happen in our community, with SEC ultimately doing some recovery.

From your description, it sounds like there is a taxable distribution in 2017 for $130,000. The client did all the right steps to do a rollover of the full amount. Was there a 5498 ever issued "by "Quest IRA?" I would have the client order a transcript from IRS for 2017

I "think" the restorative deposit of $37,000 could be considered a rollover, but I also think the $65,000 is an IRA distribution. The attorney fee would fall into a Schedule A Miscellaneous (non existent beginning 2018), or if still within the 60 day period is could be also considered a rollover.

https://www.irahelp.com/forum-post/14640-ira-rollover-ira-lawsuit-settlement-proceeds

https://www.irs.gov/newsroom/help-for-victims-of-ponzi-investment-schemes