Prosecutors who used wiretaps to make their insider trading case against the billionaire Raj Rajaratnam, founder of the hedge fund firm Galleon Group, say they will use similar tactics to fight future crimes on Wall Street.The US Attorney Preet Bharara said the Justice Department would use electronic surveillance traditionally reserved for organised crime, drug syndicates and terrorism prosecutions.Mr Bharara, whose office has jurisdiction over some of the world's biggest financial firms, said investigators relied on wiretaps to build a case against Mr Rajaratnam and former directors of a Bear Stearns hedge fund."What's very unusual is that the case is built on wiretaps," said Robert Mintz, a former federal prosecutor and partner of the law firm McCarter & English. "You need very specific and timely evidence of criminal activity before a judge is going to let you go up on a wiretap."Mr Rajaratnam faces 13 fraud and conspiracy charges, many of which carry 20-year maximum sentences. Under federal sentencing guidelines he faces 10 years in prison..Mr Mintz said the alleged $US20 million ($21.8 million) insider trading scheme was the most elaborate since the 1980s, when the US Government began using criminal laws to prosecute such allegations.Also arrested and facing charges are Rajiv Goel, director in strategic investments at Intel Capital, Anil Kumar, a director at McKinsey & Co, and Robert Moffat, an IBM executive. The former Bear Stearns Asset Management officials are Danielle Chiesi and Mark Kurland. Prosecutors called it the biggest insider trading case involving hedge funds."The defendants operated in a world of 'You scratch my back, I'll scratch your back'," Mr Bharara said. "Greed, sometimes, is not good."It was the first time wiretaps had been used to target insider trading, he said.Galleon, which started as a hedge fund firm in 1997 focusing on technology and health-care stocks, grew to more than $US5 billion in 2001. Mr Rajaratnam founded Galleon with three other colleagues from Needham & Co, an investment bank specialising in technology and health-care companies.In a court hearing on Friday Mr Rajaratnam's bail was set at $US100 million, secured by $US20 million cash, and ordered he surrender his passport.An assistant US attorney, Josh Klein, asked that Mr Rajaratnam be kept in custody because he had "enormous incentive" to flee to his native Sri Lanka or elsewhere. He hinted at further charges and said the case was "overwhelming".A defence lawyer, Jim Walden, said prosecutors were misconstruing the evidence against Mr Rajaratnam, and the case was not as strong as alleged. "This is a simple insider trading case.''The other defendants arrested in New York were also freed after posting bonds between $US2 million and $US5 million.Counsel for Ms Chiesi, Alan Kaufman, said she was shocked at her arrest and would plead not guilty. Lawyers for Mr Kurland, Mr Kumar and Mr Lawrence said their clients were not guilty.Prosecutors said tips to Mr Rajaratnam came from insiders at hedge funds, investor relations firms and companies including Intel, IBM, McKinsey and companies whose shares were traded in the alleged scheme.Mr Rajaratnam and his company earned between $US17 million and $US18 million from the fraud, Mr Bharara said. In recent days he might have been aware he was under investigation.In a criminal complaint filed in Manhattan federal court, Mr Rajaratnam told an acquaintance he believed a former Galleon employee was wearing a "wire''. He bought a plane ticket last Wednesday for travel to London on Friday.The Securities and Exchange Commission sued Mr Rajaratnam for allegedly engaging in insider trading, but said he did not deserve his reputation for "genius trading strategies" or "astute study of company fundamentals or marketplace trends''."Rajaratnam is not a master of the universe, but rather a master of the Rolodex," said Robert Khuzami, director of enforcement at the Securities and Exchange Commission. "He cultivated a network of high-ranking corporate executives and insiders, and then tapped into this ring to obtain confidential details about quarterly earnings and takeover activity."

Mr Rajaratnam was ranked this year by Forbes as the 559th richest person in the world, with a net worth of $US1.3 billion.

The six defendants are charged with using insider information in two overlapping schemes to trade in shares of companies including Google, Polycom, Hilton Hotels and Advanced Micro Devices.Prosecutors had been investigating the case since at least November 2007, when someone they have not named began meeting FBI agents. The person, who the Government said had pleaded guilty, used inside information to trade securities and had been tipping Mr Rajaratnam since 2006. Authorities said they had taped conversations of the billionaire and had also tapped two of Ms Chiesi's telephone lines.

"There are numerous conversations that are recorded that very clearly depict the fact that [Mr Rajaratnam] engaged in a veritable smorgasbord of insider trading activities," Mr Klein said. Mr Rajaratnam had told colleagues to create emails designed to hide his source of information and "would make trades intended to mask his illegal activity".

Prosecutors said Mr Rajaratnam had traded in 2006 and 2007 on leaks from insiders at Polycom, Moody's and Market Street Partners. A Moody's analyst offered news about Hilton, and the Market Street source provided tips about Google. Mr Rajaratnam earned $US12.7 million on the leaks and gave a confidential government informant inside information on other companies in return, they said.Mr Goel, who had been working for Intel, passed on news about Clearwire he learnt from investments made by Intel, and Mr Rajaratnam earned about $579,000 in profits, prosecutors said.In return, "Rajaratnam placed profitable trades for the benefit of Goel in a personal brokerage account maintained by Goel at Charles Schwab", Mr Bharara said.In another alleged scheme, Ms Chiesi received tips from an unidentified person at Akamai Technologies and Moffat, who allegedly passed along information about IBM, Sun Microsystems and Advanced Micro Devices. Ms Chiesi gave the tips to Mr Kurland and the two traded on them.Ms Chiesi passed the tips on to Mr Rajaratnam, who in turn gave Ms Chiesi inside information about AMD and other companies.