His lawyers -- including Benjamin Brafman who defended former IMF chief Dominique Strauss-Kahn -- argued Zarrab had not broken U.S. laws because he was a foreigner living abroad.
"As a foreign national sitting in Turkey he hasn`t violated U.S. criminal law," said one of Zarrab`s attorneys, Paul Clement, before Judge Richard Berman. "He`s not subject to the jurisdiction of the U.S.
"This is an unprecedented expanded prosecution."
However, Assistant U.S. Attorney Michael Lockard said "foreign nationals are not permitted to use U.S. financial institutions to benefit Iran."
Wearing a blue prison uniform, Zarrab listened to the proceedings with the assistance of an interpreter.
Brafman also challenged the legality of Zarrab`s Miami arrest because customs officers had requested the businessman`s cell phone passcode and a list of his businesses and bank accounts before he was allowed to call a lawyer.
"They have orchestrated this and allowed him to incriminate himself," Brafman said.
In response to that argument Lockard said it was not out of line for airport customs agents to request access codes from suspicious passengers, and that Zarrab had given his consent.
Zarrab, who operates a gold brokerage, currency exchange, shipbuilding company, furniture manufacturing business and real estate construction firm, has passports from Iran, Macedonia and Turkey -- countries that either have no extradition treaty with America or do not extradite citizens.
His lawyers unsuccessfully tried in March to let him swap the grimness of a federal lock-up for a swanky Manhattan apartment with round-the-clock security.
Currently under trial in the United States, Zarrab, 32, was the prime suspect in a corruption and bribery scandal involving the Turkish government that went public on Dec. 17, 2013. He is accused of being the ringleader of a money laundering and gold smuggling ring in Turkey that circumvented sanctions against Iran.
The charges were dismissed after prosecutors investigating the case were accused by the ruling party and then-Prime Minister Recep Tayyip Erdoğan of plotting against the government and removed from their posts.
Four former cabinet members - EU Minister Egemen Bağış, Economy Minister Zafer Çağlayan, Interior Minister Muammer Güler and Urban Planning Minister Erdoğan Bayraktar - were accused in the probe before the cases were dropped.
The ruling Justice and Development Party (AKP) accused U.S.-based Islamic preacher Fethullah Gülen’s followers of using the case to plot against the government, before launching a huge crackdown on the group in state institutions, security bodies and the private sector.
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