I'd like to know if the phrase "he was a German spy" in the chapter three of The Great Gatsby means "he spied for the Germans" or that Gatsby was both a spy and a German.
A thrill passed over all of us. The three Mr. Mumbles bent forward and listened eagerly.
“I don’t think it’s so much that,” argued Lucille sceptically; “it’s more that he was a German spy during the war.”
The phrase is part of the huge range of possibilities about the past experiences of the mysterious, wealthy, secretive Gatsby that was fueling the gossip at the party. The speaker is suggesting that perhaps he had been a spy for the Germans during World War I. The idea was discounted by the girl who understood that he had been "in the American army during the war."
Many other rumors were being put forth during the conversation. It was considered "funny" that he replaced Lucille's evening gown, which had been torn when she attended a previous party at Gatsby's mansion. From there, the speculation grew quickly, as the persons involved in the conversation almost competed in trying to present a more scandolous idea to explain his past.
He doesn't want any trouble with anybody...Somebody told me they thought he killed a man once...it's more that he was a German spy during the war...I'll bet he killed a man.