Is it permissible to utilize gambling money to pay off debt, start a business, and pay zakat from it, especially since the principal has previously lost significant amounts of money?

You are not permitted to dispose of your client's (your brother's or anyone else's) money except in ways that are customary for maintaining and preserving wealth. What you took from the price of the property without your brother's permission must be returned to him, along with repentance and seeking forgiveness, regardless of the source of his money. You have no concern with the source of the money unless you are helping him acquire it through forbidden means. Advising your brother and rectifying his behavior should be done with kindness and seeking assistance from good people. To protect his money from being squandered in gambling, you can request an interdiction against him after proving his folly judicially, for whoever spends a dirham in what is unlawful is a squanderer and should be interdicted. Do not accuse your brother of gambling or that his money is unlawful without conclusive evidence. If it is true that all his money is unlawful, then neither you nor anyone else is permitted to benefit from it; rather, your brother must dispose of it through legitimate means.