NEW YORK (Bloomberg) - US prosecutors who used wiretaps to make their insider trading case against billionaire Raj Rajaratnam, founder of hedge fund firm Galleon Group, said they will use similar tactics to fight future crimes on Wall Street.

US Attorney Preet Bharara in Manhattan said on Friday that the Justice Department will employ the same kind of electronic surveillance traditionally reserved for organised crime, drug syndicates and terrorism prosecutions. Bharara, whose office has jurisdiction over the headquarters of some of the world's biggest financial firms, said investigators relied on wiretaps to build a case against Rajaratnam and former directors at a Bear Stearns Cos. hedge fund.

"What's very unusual is that the case is built on wiretaps," said Robert Mintz, a former federal prosecutor and partner in the Newark, New Jersey, office 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."

Rajaratnam, 52, faces 13 fraud and conspiracy counts, many of which carry 20-year maximum sentences. Under federal sentencing guidelines, he faces 10 years in prison if convicted at trial, Assistant US Attorney Josh Klein said in court yesterday. Galleon Partners, based in Manhattan, has offices in London, Singapore, Mumbai, and Menlo Park, California.

Mintz said the alleged $20 million scheme is the most elaborate insider-trading ring discovered since the 1980s when the government began using criminal laws to prosecute such allegations.

Also arrested on Friday were Rajiv Goel, who worked at Intel Capital as a director in strategic investments, Anil Kumar, who worked as a director at McKinsey & Co., and IBM Corp. executive Robert Moffat. The former officials at Bear Stearns Asset Management are Danielle Chiesi and Mark Kurland, who were affiliated with the firm's New Castle Partners, which managed about $1 billion. 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," Bharara said at a press conference on Friday. "Greed, sometimes, is not good."

He said the prosecution is the first time wiretaps have been used to target insider trading, calling the case "unprecedented".

Galleon, which started as a hedge fund firm focusing on technology and health-care stocks, grew to more than $5 billion in 2001 from its start in January 1997. Rajaratnam founded Galleon with three other colleagues from Needham & Co., an investment bank that focused on technology and health-care companies.

Galleon Management, the company's advisory business, oversaw more than $2.6 billion at the end of March, mostly on behalf of hedge funds, according to regulatory filings it submitted to the US Securities and Exchange Commission (SEC) at the time. Rajaratnam held a 50 percent to 75 percent controlling stake, according to the documents.

At Friday's court hearing, US Magistrate Judge Douglas Eaton in Manhattan set Rajaratnam's bail at $100 million, to be secured by $20 million in assets and guaranteed by his wife and four others. Rajaratnam, who gave up his passport, may not travel more than 110 miles from New York City.

Klein asked Eaton to hold Rajaratnam in jail pending his trial. He said the hedge fund manager had "enormous incentive" to flee to his native Sri Lanka or elsewhere. The prosecutor said there's additional evidence, there may be more charges against Rajaratnam and that the case is "overwhelming".

Rajaratnam told court officials after his arrest that he was worth $200 million, Klein said in court, adding that the hedge fund founder is a billionaire.

Defense attorney Jim Walden said prosecutors are misconstruing the evidence against Rajaratnam and that the case isn't as strong as they allege.

"This is a simple insider trading case," Walden said.

The other defendants arrested in New York were also freed after posting bonds between $2 million and $5 million. Goel was arrested in California, the government said.

Alan Kaufman, the attorney for Chiesi, 43, said in an interview that his client was "shocked" at her arrest yesterday and will plead innocent. Kurland's attorney, Lawrence Iason, and Moffett's lawyer, Kerry Lawrence, also said their clients are not guilty.

"Anil Kumar is as shocked as everyone else who knows him to see his name in this complaint," his lawyer, Charles Clayman, said in a statement. "He emphatically denies these charges."

According to prosecutors, tips to Rajaratnam came from insiders and others at hedge funds, investor relations firms, and companies including Intel, IBM, McKinsey, and companies whose shares were traded in the alleged scheme.

Bharara said the investigation was continuing.

Rajaratnam and his firm earned from $17 million to $18 million from the fraud, Bharara said. In recent days, he may have been aware he was under investigation, the government said. According to one of two criminal complaints filed yesterday in Manhattan federal court, Rajaratnam told an acquaintance that he believed a former Galleon employee was wearing a "wire." Rajaratnam bought a plane ticket on October 14 for travel to London on Friday, according to the complaint.

"Galleon was shocked to learn today that Raj Rajaratnam was arrested this morning at his apartment," the firm said yesterday in a statement. "We intend to co-operate fully with the relevant authorities. Galleon continues to operate and is highly liquid."

The SEC yesterday sued Rajaratnam for allegedly engaging in insider trading. Rajaratnam did not deserve his reputation for "genius trading strategies" or "astute study of company fundamentals or marketplace trends," according to the SEC complaint.

The six defendants are charged with using insider information in two overlapping schemes to trade in shares of companies including Google Inc., Polycom Inc., Hilton Hotels Corp. and Advanced Micro Devices Inc., according to the complaints.

Yolande Daeninck, a spokeswoman for McKinsey, said the firm is "distressed" by Kumar's arrest. Chuck Mulloy, an Intel spokesman, said the company is investigating and has put Goel on leave. Moody's said in a statement that it's cooperating with prosecutors. A call to the main number of Market Street Partners, a San Francisco investor relations firm, wasn't returned. IBM spokesmen Ian Colley and Ed Barbini didn't respond to messages seeking comment.