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Reza Zarrab had been due to go on trial on Tuesday in Manhattan federal court, but the prosecution made clear that Zarrab was, instead, their star witness.

Zarrab's former co-defendent now alone in the dock is Turkish banker Mehmet Hakan Atilla, accused of violating sanctions against Iran, bribery and money laundering.

The case has provoked the ire of Turkish President Recep Tayyip Erdogan, further straining ties between NATO allies Washington and Ankara.

Analysts believe revelations in the trial could implicate senior government officials close to Erdogan. Ankara had demanded for months that Zarrab be freed to avoid the trial.

Turkey has alleged the case is a conspiracy by the movement run by Pennsylvania-based Muslim cleric Fethullah Gulen, whom Turkey blames for a coup attempt against Erdogan last year.

Zarrab, 34, testified that he met Turkey's former economy minister, Zafer Caglayan, in 2012 as Zarrab sought to establish himself as the prime intermediary in lucrative gold traffic involving Turkish and Iranian banks.

The gold-for-oil operation enabled Iran to use revenue from its oil sales for payments on global markets despite the prohibition against US banks doing business with sanctions-hit Tehran.

Caglayan offered to help Zarrab become the principal go-between for the Turkish state bank Halkbank, Zarrab testified.

"I can help with this provided there is a profit share of 50-50," Caglayan said, according to Zarrab's testimony.

At the time Zarrab was best known in Turkey for his lavish lifestyle as well as his wife, the famous Turkish singer Ebru Gundes.

Wide-ranging corruption 

Zarrab told the court he paid 45 to 50 million euros ($53.5 to $59.4 million) plus approximately $7 million in bribes to the minister between March 2012 and March the following year. 

The defendant, Attila, is deputy chief executive of Halkbank.

Caglayan resigned from the Turkish government at the end of 2013 during a wide-ranging Turkish corruption scandal that saw Erdogan, then prime minister, replace nearly half his cabinet as his own hold on power was threatened.

In 2015, Turkey's parliament voted against putting Caglayan and three other ex-ministers on trial on accusations of bribery and influence-peddling.

They were accused of receiving bribes from Zarrab to facilitate UN sanctions-busting trade with Iran and other deals.

US authorities, however, in September this year charged Caglayan and eight other people with carrying out hundreds of millions of dollars in transactions benefitting Iran and Iranian entities in violation of US sanctions.

Caglayan remains on the run, and Attila is the only one of the nine currently on trial.

Zarrab testified on Wednesday that Attila helped to doctor the trade so that the Iranian origin of the funds would be undetectable by US banks.

His testimony is scheduled to continue on Thursday, with a possible cross-examination from the defence on Friday.

Defence lawyer Victor Rocco warned on Tuesday that he intends to discredit Zarrab, dubbing him a "liar" and corruption expert who was looking to bribe his US guards.

Zarrab confirmed Wednesday that he tried to bribe his guards in the federal prison where he is being held in exchange for alcohol and a cell phone.