Bloomberg l Christian Berthelsen, Bob Van Voris and Chris Dolmetsch: Reza Zarrab, a Turkish-Iranian gold trader at the center of an international corruption case, is set to tell a New York jury the �inside story� of a plot to evade American sanctions on Iran that reached the highest levels of Turkey�s government, a prosecutor said.

Zarrab is the U.S. government�s star witness in the prosecution of Mehmet Hakan Atilla, a deputy chief executive officer at Turkiye Halk Bankasi AS, who is accused of conspiring with Zarrab to launder money and funnel Iranian funds through the U.S. financial system. Zarrab, who has pleaded guilty after being charged with Atilla, is likely to take the witness stand later on Tuesday or on Wednesday.

"Atilla and his lies played a crucial role in giving Iran access to U.S. dollars and U.S. banks,� Assistant U.S. Attorney David William Denton Jr. told jurors at the start of the case. �Iran did not need soldiers. Iran needed a banker.�

The disclosure of Zarrab�s cooperation, minutes before the lawyers addressed jurors on Tuesday, roiled markets in Turkey, as the Lira fell as much as 1.7 percent and Halkbank shares dropped 7.9 percent. Yields on 10-year bonds have surged to records above 13 percent.

The revelation ends weeks of mystery after the gold trader suddenly stopped participating in the defense. With the U.S. expected to present evidence of corruption at the highest reaches of the Turkish government, the case has sparked outrage from Turkish President�Recep Tayyip Erdogan, who claims the prosecution is a plot to undermine his country�s economy.

Zarrab was arrested in the U.S. last year on charges that he helped bank executives and others in Turkey to help Iran disguise hundreds of millions of dollars in transactions that went through the U.S. financial system. Now, instead of standing trial, Zarrab will testify against Atilla, 47, and recount the alleged scheme.

The case is about �lies that were told to the United States by people who were doing the bidding of the Islamic Republic of Iran, the world�s foremost state sponsor of terrorism,� Denton said.

Atilla and other plotters used elaborate transactions to �fool the U.S. government,� he added. They �covered up their lies with millions of dollars of bribes to the highest-level officials of the Turkish government� -- including, he said, the then-minister of Turkey�s economy. Court papers identify the minister as Mehmet Zafer Caglayan.

Atilla is accused of fraud, sanctions violations and conspiracy to launder money. He is one of nine people to have been charged, including Caglayan and other senior Turkish government officials and bank executives, but only he and Zarrab have been in U.S. custody. The U.S. sanctions came as punishment for Iran�s effort to build a nuclear bomb earlier in the decade.
Mystery Deepens on Eve of U.S. Sanctions Case Roiling Turkey


Atilla�s lawyer, Victor Rocco, told jurors his client was a hard-working civil servant caught up in a �swirling, huge international storm of intrigue, lies and massive corruption.�

�Atilla is just another one of Reza Zarrab�s many victims," Rocco said in his opening remarks. "A hapless and helpless pawn.�

Rocco assailed Zarrab, saying he has won a �get-out-of-jail-free card� by falsely implicating Atilla. He claimed that Zarrab bribed guards and other prisoners while in a Turkish jail to get access to liquor, drugs and women. It was Zarrab, and not Atilla, who made hundreds of millions of dollars waging an "economic holy war" against U.S. sanctions, using the money to buy "jets and yachts and people," he said.

The first witness to testify is FBI Special Agent James Atwater, and he�ll be followed by Lisa Palluconi, a U.S. Treasury Department official.

Before the trial began, defense lawyers sought a brief postponement, complaining that prosecutors had just turned over 10,000 documents, many in Turkish, that they had not had time to review. U.S. District Judge Richard Berman denied the request.

The judge did agree to unseal documents related to Zarrab�s guilty plea, which may be made public later on Tuesday.

Since his arrest in Florida in March 2016, Zarrab had been held in grim New York City jails before he was suddenly released. Two people familiar with the case said Zarrab has remained in U.S. custody but not in the federal jails.