Caspersen also tried to solicit another $110 million or so more from investors by misrepresenting the nature of several "fake funds," prosecutors claim.

Accused financial fraudster Andrew Caspersen lost a staggering $123 million by compulsively gambling on put options in the S&P 500 index from February until his arrest in March for swindling investors out of what allegedly totaled more than $38 million, it was revealed Tuesday in Manhattan federal court.

He lost it all on "put" options, and now he could very well be put in prison soon.

His degenerate speculating on the S&P put options — which he focused on exclusively — led to such big losses that one of two brokers who had handled his trades ended up telling Caspersen "no more," according to the lawyer.

Caspersen cajoled $1 million out of McRae's family, and also hit up classmates from Princeton University and Harvard Law School.

The family and friends he begged for money to finance his spiraling losses included the family of his former fiancee, Catherine "Cat" McRae, an employee of Fred Alger Management who died in the Sept. 11, 2001, terror attacks on the World Trade Center, said Shechtman.

A new charging document filed Tuesday against Caspersen accuses him of making false representations to about a dozen relatives and friends and classmates to solicit their investments in a series of "fake" funds.

Caspersen's defense lawyer Paul Shechtman also told reporters that a desperate Caspersen, who was a partner in Paul Taubman's PJT Partners, had already burned through all of his $20 million personal fortune in the decade between when he graduated from Harvard Law School and 2013 due to his pathological gambling.

The stunning revelations came after a court hearing in federal court, where Shechtman told Judge Jed Rakoff that Caspersen likely will plead guilty under an agreement with prosecutors on July 6. Caspersen is charged with securities and wire fraud.

Caspersen, 39, is the son of the late Wall Street moneyman Finn M.W. Caspersen, the former chairman of Beneficial Corp., who committed suicide in 2009.

The younger Caspersen was busted in March on charges of defrauding a charitable foundation run by billionaire Louis Bacon out of almost $25 million, and an investor in Bacon's Moore Capital Management out of another $400,000.

Prosecutors, in a criminal information document released Tuesday, said that in all Caspersen ended up receiving 18 payments, in a total amount of about $38.5 million, from more than 10 people as part of his scheme to induce them to place the money in several fake funds.

"In addition, Caspersen attempted to solicit approximately $110 million more in the Fake funds using similar misrepresentations," the document said.

For Caspersen, his arrest had the beneficial effect of ending the enormous amount of stress he was under, according to his lawyer.

"When you're caught like this, there's a certain sigh of relief, because your life doesn't revolve around the S&P anymore," Shechtman said Tuesday.

Caspersen's life had indeed revolved around that key index of stocks, which he tracked compulsively each day on an app on his smartphone, according to the lawyer.

Shechtman said that Caspersen — who told Rakoff he suffers from compulsive gambling and alcohol abuse and is under psychiatric care — traded in nothing other than put options for the index.

Puts give their holder the right to sell securities, or indexes, at a certain price by a certain date. A trader can either buy a put, or sell a put, with each form of the trade effectively acting as a bet on which direction the stock or index is headed.

Caspersen would make huge bets on S&P put options twice a day: at 9:30 a.m., and then again at 5 p.m., according to his lawyer.

In mid-February, Caspersen started one day with as much as $113 million in his trading account, but by the end of that day, the account had increased in value to $123 million, his lawyer said.

In March, after almost all of that money was gone, Caspersen was arrested after trying to make up for the losses by scrambling to scratch up cash from family and friends, according to the attorney.