Gates did not make eye contact with Manafort as he took the stand wearing a yellow tie and navy blue suit.
The jury has heard how Manafort made tens of millions of dollars for political work with pro-Russian politicians in Ukraine.
Asked whether the money in the accounts was income to Manafort, Gates said, "it was".
Gates is testifying as part of a plea agreement with the government.
Gates's appearance in court marked a dramatic moment in the probe: the first visible case of a witness flipping, or turning on friends or colleagues in a case. "Rick Gates had his hand in the cookie jar and couldn't let his boss find out", he said.
He is awaiting sentencing and his ability to secure leniency from the government depends on him being cooperative and forthcoming with the jury.
In court on Monday, Gates testified that he did steal from Manafort.
"I was the one who helped organize the paperwork and initiate the wire transfers", Gates said, describing Manafort's use of unregistered Cypriot bank accounts to collect political consulting payments from Ukrainian oligarchs.
The charges largely predate his five months on the Trump campaign but were the first to go to trial arising from Special Counsel Robert Mueller's investigation into Russian interference in the 2016 United States election.
Manafort has pleaded not guilty to 18 bank and tax fraud charges and failing to disclose foreign bank accounts.
The defense in the case is likely to subject Gates to an intensive cross-examination after arguing during opening statements that he embezzled millions of dollars from Manafort and then turned against him under pressure from Mueller.
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Manafort, a flamboyant figure in Washington for decades, became known for his consulting and lobbying work for ethically questionable global leaders like Ukraine's Viktor Yanukovych.
Paul Manafort's ongoing trial in Virginia, on charges that include bank and tax fraud, may be a sideshow to Special Counsel Robert Mueller's larger Russian Federation investigation, but it produced a pretty compelling moment of courtroom drama on Monday.
In calling Gates, the government will present jurors with the firsthand account of a co-conspirator expected to say Manafort was knee-deep in an alleged scheme to hide millions of dollars from the IRS and defraud several banks.
The prosecution's witness list still has 19 names of those who've yet to appear in court. The judge twice requested the lawyers to his bench, out of the earshot of the jury and the public, to discuss their approach to questioning.
Paul Manafort's attorney says the former Trump campaign chairman's longtime deputy will be testifying next in Manafort's fraud trial.
But Laporta's testimony raised the stakes for Manafort.
Gates came out swinging from the witness box.
Manafort's defense has sought to blame Gates for any illegal conduct and accused him of embezzling millions of dollars from Manafort.
"In most instances, it was clear that Mr. Manafort knew what was going on", she said.
Gates has been cooperating with special counsel Robert Mueller's Russian Federation probe after he cut a plea deal earlier this year. Gates agreed to flip on his former boss in exchange for leniency. His testimony, given in short, clipped answers as Manafort rarely broke his gaze from the witness stand, follows that of vendors who detailed Manafort's luxurious spending and financial professionals who told jurors how the defendant hid millions of dollars in offshore accounts.
Mr Mueller is also investigating possible coordination between Trump campaign members and Russian officials in the election campaign, but the charges against Mr Manafort do not address that.