ADVANCE GIVEN BY CLIENT IS SPENT BY ME AND NOT ABLE TO RETURN

I have taken an advance money from a foreign company for IT application development , I had done the contract with the client on email but the money given by him is used by me and i have bore some losses and due to which I cannot return the money to client. Can u help me what can be legal issues in this matter?? How can he file a suit against me and in what time it will get resolved and what can I answer him? Can I show that I have got insolvent and in that case what actions he can take? What can be consequences for me Kindly guide me.. His application is not yet completed