By Luc Cohen

NEW YORK (Reuters) - In U.S. prosecutors' telling, Sam Bankman-Fried embezzled money from depositors in his FTX cryptocurrency exchange ever since he launched it in 2019, and the resulting shortfall led directly to its collapse as crypto prices swooned last year.

But in his own version and in explanations put forth by his lawyers, Bankman-Fried thought FTX, like a bank, could make investments with customers' money as long as they were able to withdraw it - and he did not know that actions taken by his closest colleagues had jeopardized the availability of funds.

Over the course of six weeks starting on Oct. 3, a federal jury in Manhattan is due to weigh these dueling narratives during Bankman-Fried's criminal trial on fraud charges, before determining whether the 31-year-old former billionaire is guilty on seven counts of fraud and conspiracy.

Bankman-Fried, who quit his job as a quantitative trader at Wall Street firm Jane Street to found crypto hedge fund Alameda Research in 2017, has pleaded not guilty.

A conviction would seal his spectacular fall from grace. During his meteoric rise as the values of bitcoin and other digital assets soared during 2020 and 2021, he became something of a poster child for responsibility in the often rough-and-tumble cryptocurrency sector.

He plastered FTX's logo on a basketball arena in Miami and on MLB baseball umpires' uniforms. He hired star athletes and actors to endorse the platform as safe. And as his net worth surged to $26 billion, he pledged to give most of his wealth away to philanthropic causes such as pandemic preparedness.

FTX survived a downturn in crypto prices that saw other major digital currency platforms fail earlier in 2022, with Bankman-Fried even bailing some of them out.

But in November, crypto news outlet CoinDesk published an Alameda balance sheet showing the fund was heavily exposed to FTT, a token issued by FTX itself. That spurred a wave of customer withdrawals from which the exchange could not recover.

Prosecutors say it was a facade all along. Bankman-Fried is charged with stealing billions of dollars in FTX deposits to plug losses at Alameda as well as to buy luxury real estate and donate to U.S. political campaigns to promote crypto-friendly legislation.

"This is one of the biggest financial frauds in American history," Damian Williams, the U.S. Attorney in Manhattan, said in December 2022 upon announcing Bankman-Fried's arrest in the Bahamas, where FTX was based.

Bankman-Fried has acknowledged inadequate risk management, but denied stealing funds. He intended to tell Congress in a December hearing over FTX's collapse that he made a mistake and did not know how much FTX had lent Alameda due to a "quirk" in the company's internal controls, according to a written draft of his planned testimony published by Forbes and confirmed by Bankman-Fried as authentic. Bankman-Fried was arrested before he could testify.