Caspersen’s Gambling Spiral Wiped Out $113 Million in Weeks

  • Ex-banker accused of duping charity to finance futures bets
  • Prosecutors say Caspersen tried to solicit $110 million more

Wall Street scion Andrew Caspersen had been gambling since his first year at Harvard Law School when it cost him his inheritance. By the time federal prosecutors caught up with him 10 weeks ago, the former banker duped a charity out of almost $25 million, part of a futile bid to recoup losses -- which in the end might have cost investors $150 million

Caspersen’s lawyer told reporters after a court hearing Tuesday that his client was done in by a gambling mania that compelled him to lose tens of millions of dollars in options trading and pursue new investors to recoup capital. He’s negotiating a deal with prosecutors and will almost certainly plead guilty to fraud charges when he returns to court on July 6, said the lawyer, Paul Shechtman.

What began with sports gambling turned into a frenzy with Caspersen, 39, aggressively betting hundreds of millions of dollars on the outcome of movements in the S&P index, his lawyer said. On Feb. 11, Caspersen was flush with cash. He had almost $113 million in his trading account -- enough to repay investors and cover everything he owed. Instead, he returned to the market, lost $108 million by March 9 and was completely wiped out by the time he was arrested in late March, the lawyer said.

"It was almost as if he was gambling," said Shechtman, describing his client’s trading. "He put it all down on a bet that the market would go down. This is not a story of Wall Street greed," Shechtman said in an interview after court. "This is the story of a person who had a serious mental health problem untreated until his arrest."

Charity Duped

Caspersen worked for PJT Partners Inc. until he was fired March 28. The charitable foundation of hedge-fund billionaire Louis Bacon said he duped it out of $24.6 million, while an investor at the fund lost another $400,000. Employing a "Ponzi-like scheme," prosecutors said Tuesday that Caspersen defrauded dozens of investors out of at least $38.5 million and attempted to solicit another $110 million more from victims.

Caspersen, who went from Princeton University to law school and then Wall Street, appeared Tuesday in Manhattan federal court, where he pleaded not guilty to securities fraud and wire fraud charges, which each carry possible prison terms of as long as 20 years. His lawyer said Tuesday there’s almost no defense to the charges.

When asked by the judge whether Caspersen intends to plead guilty, Shechtman said “I think that’s most likely. Almost a certainty.” The judge scheduled another hearing for July 6.

By the time he finished his first year at Harvard, Caspersen had already lost his entire fortune -- $20 million that he’d inherited from his family -- in casinos and by sports betting, according to Shechtman. 

He made back millions of dollars through bonuses and Wall Street salary but pursued aggressive options trading on the S&P index during his time at PJT Partners, the lawyer said. Facing millions of dollars in mounting losses beginning in about August 2014, Caspersen tried to boost his finances by getting his friends and family, soliciting them to put up about $38.5 million, Shechtman said. The victims included the relatives of Caspersen’s late fiancee, who was killed in the Sept. 11 terrorist attacks, Shechtman said.

Caspersen’s family history has triumph and tragedy. His father, Finn M.W. Caspersen, ran the consumer-finance company Beneficial Corp. for almost two decades, after his own father had overseen it for 18 years. In 1998, it was bought out for more than $8 billion. His father committed suicide in 2009.

Bad Bet

His ultimate downfall came when he placed a series of bad bets in mid-February that the S&P Index would fall. The index rose 6.1 percent from Feb. 12 to March 1.

"There’s no greed here, there was always an intent to pay people back," Shechtman said. "There was a pathological addiction here. He could have repaid them all back but the next day, he bet it all away."

Prosecutors are also seeking financial penalties which Caspersen can’t pay, Shechtman said, noting that his client has sold his home in Bronxville, New York. "There’s nothing left of Andrew’s money, there’s no there there. Nothing," the attorney said.

Before moving in 2013 to Park Hill Group, then a part of private-equity giant Blackstone Group LP, Caspersen spent about 10 years at Coller Capital. Park Hill, which helps raise capital for hedge funds, private equity firms and secondary funds, was spun out by Blackstone and is now owned by Paul J. Taubman’s PJT Partners.

The case is U.S. v. Caspersen, 16-mj-2011, U.S. District Court, Southern District of New York (Manhattan).

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