Big insider trading investigation creating even larger case

? An insider trading case last year that federal authorities said was the biggest ever is providing a recipe for another case that may be even bigger.

The current case is largely an extension of work that led to the arrest of Galleon Group founder Raj Rajaratnam in October 2009. The Galleon investigation marked the first time that federal authorities used wiretaps in an insider trading probe.

Similarly, wiretaps led to the first arrest in the latest case. Don Ching Trang Chu, a consulting firm executive, was arrested Wednesday for allegedly providing private information about a company’s corporate earnings to a hedge fund.

The FBI this week searched the offices of three hedge funds and subpoenaed some of Wall Street’s most influential firms, including Janus Capital Group and SAC Capital.

The Galleon case has resulted in 23 arrests and 14 guilty pleas. Many of those arrested are cooperating in the latest investigation.

The cases represent an offensive by U.S. Attorney Preet Bharara against white collar crime in the securities industry. One aim of the current case: unearthing those who helped match employees at public companies with large-scale traders hoping to profit from information that wasn’t available to the public.

Authorities have said little about the current investigation. But a study of Bharara’s comments over the past year show how it has progressed.

Bharara said when he announced the arrests in the Galleon case last year that the use of wiretaps marked a turning point in investigations of insider trading. Wall Street insiders, he said, will be forced to wonder if every conversation is recorded.

“When sophisticated business people begin to adopt the methods of common criminals, we have no choice but to treat them as such,” he said.

A month later, as he announced more arrests, he said “the alarm bells have only grown louder.”

“How pervasive is insider trading?” he asked. “Is this just the tip of the iceberg? We don’t have an answer yet. But we aim to find out.”