By Jody Godoy and Luc Cohen

NEW YORK Sam Bankman-Fried is set to go on trial on charges of stealing billions of dollars from customers of his FTX cryptocurrency exchange starting on Tuesday, nearly a year after the company's collapse shocked markets and tattered his reputation.

Federal prosecutors say the 31-year-old former billionaire embezzled from FTX customers since its founding in 2019 through its November 2022 bankruptcy in order to prop up his hedge fund Alameda Research, buy luxury properties and donate more than $100 million to U.S. political candidates.

Bankman-Fried has pleaded not guilty to seven counts of fraud and conspiracy. He has acknowledged inadequate risk management, but denied stealing funds. His lawyers have signaled in court papers they plan to argue that FTX's treatment of customer funds were proper, and that others at FTX and Alameda bore the bulk of the blame for their failure.

The first step in the trial will be selecting the 12-member jury that will ultimately weigh those competing narratives in deciding whether to convict Bankman-Fried.

Starting at around 9:30 a.m. EDT (1330 GMT) in Manhattan federal court, U.S. District Judge Lewis Kaplan will ask a pool of New York residents questions about their backgrounds and experiences in an effort to weed out any prospective jurors who may be biased.

The trial is expected to last up to six weeks. It will feature testimony from three former members of Bankman-Fried's inner circle who have pleaded guilty to fraud charges themselves and agreed to cooperate with the Manhattan U.S. Attorney's office.

Bankman-Fried's lawyers have signaled they plan to challenge the credibility of those witnesses - who include former Alameda chief Caroline Ellison and former FTX executives Gary Wang and Nishad Singh - by arguing they are motivated to implicate their client to get a lower sentence, a common strategy in white collar fraud cases.

They have also laid the groundwork to argue that Bankman-Fried believed his exchange was allowed to invest customers' deposits as long as they were ultimately able to take out their funds, and that a series of business failures - not deliberate fraud - left the exchange without enough money to meet withdrawal requests.

Bankman-Fried's is the highest profile case U.S. prosecutors have so far brought against a former cryptocurrency executive.

His indictment last December marked a spectacular fall from grace for Bankman-Fried, who had garnered a reputation as a legitimate operator in an industry whose image was pockmarked by scams and purported get-rich-quick schemes.

Prosecutors say Bankman-Fried built that reputation on lies and bolstered it with endorsements from celebrities and star athletes.

Bankman-Fried has been detained at the Metropolitan Detention Center in Brooklyn since Aug. 11, after the judge found he had likely engaged in witness tampering - including by sharing Ellison's personal writings with a reporter. Ellison and Bankman-Fried are former romantic partners.

He will be brought to court early on most days to allow him to prepare with his lawyers.

(Reporting by Jody Godoy and Luc Cohen in New York; Editing by Amy Stevens and Lincoln Feast.)