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.