A PhD student without an adviser I joined "X" university (US) for my PhD to work with a specific adviser (Y). For 3 years, I prepared my background to work in Y's area (through education and research exp.). But now Y says that, "I am not sure if we can work together. I am not saying no but I can not say yes too."

During my admission process, Y told me that we can work together. And I made my decision based on this promise. Since everything worked out well, I did not feel the need to approach other faculty members from the department. But as a result, now, I am without an adviser. And Currently, my department is trying to patch me up in areas that are completely new to me.  

This situation has forced me to start thinking about my options and I came across following queries,

a) should I graduate with a 2nd masters degree?

b) since I want to gain my PhD, do I need to explain my 2nd masters in my statement of purpose?

c) is 2nd masters going to raise red flags while being considered for the PhD admission in new university?

Any advice on (a), (b) &amp; (c) will be really helpful. Thanks in advance.
if Y had not intention of working with me then why did they accept me?


There are many ways to unpack this: 


maybe Y did want to work with you, and then things didn't work out: funding, or mutual incompatibility, or interest changes. Stuff happens
Y could recommend you for admission as a competent student without feeling there was an implied guarantee that you'd work together. Maybe there are others in the department with similar interests. 


As has been said on this forum many times, an advisor-advisee relationship is more two-way than one might think. There has to be a mutual fit otherwise even two perfectly reasonable people with mutual interests might not click.