Raj Rajaratnam, the billionaire chief of the Galleon Group hedge fund is the most prominent figure convicted in the government’s crackdown on insider trading on Wall Street.  The verdict in his trial is the culmination of a case that has led to insider trading charges against 25 defendants – 21 of whom have pleaded guilty – including former executives at I.B.M., Intel and Bear Stearns. With Rajaratnam found guilty on all 14 charges, the government's message according to lead prosecutor U.S. Attorney Preet Bharara, is clear. "There are rules and there are laws, and they apply to everyone, no matter who you are or how much money you have.” With the trial completed, the industry is left to ponder the verdict's implications.

The government built its case against  Rajaratnam with powerful wiretap evidence. Over a nine-month stretch in 2008, federal agents secretly recorded Mr. Rajaratnam’s telephone conversations. They listened in as Mr. Rajaratnam brazenly – and matter-of-factly – swapped inside stock tips with corporate insiders and fellow traders.

In the early morning hours of Oct. 16, 2009, federal agents arrested Mr. Rajaratnam at his Sutton Place apartment on Manhattan’s East Side. The government placed him at the center of a vast insider trading conspiracy, accusing him of using a corrupt network of tipsters to earn tens of millions of dollars in illegal trading profits in stocks including Google and Hilton Worldwide.

Some traders in Las Vegas for a Skybridge Alternative Investment conference notes CNBC's John Carney reacted nervously to the news.

"I think some of us were just hoping that the jury would somehow rebuke the government for treating insider trading like the mafia. Maybe let him off on some charges," one said.

"I guess, we're all wondering what this means going forward. How many phones get tapped? What info is out of bounds?" said another trader.

He based his defense on the so-called mosaic theory of investing. Galleon was famous for its dogged digging for information about publicly traded companies that would form a “mosaic” –- a complete picture of a company’s prospects that gave it an investment edge over other investors.

Mr. Rajaratnam’s lawyers argued that all of his supposed illegal trading was grounded in publicly available newspaper articles, analyst reports and company news releases. For instance, the defense presented evidence showing that before Advanced Micro Devices acquired ATI Technologies – a deal that prosecutors said Mr. Rajaratnam had received an illegal tip about – 51 news articles and 6 analyst reports speculated on the likelihood of a merger between the two companies.

Prosecutors dismantled Mr. Rajaratnam’s defense by acknowledging that Galleon performed legitimate research. But at the same time, they argued, the firm routinely violated securities laws. In the words of a former Galleon portfolio manager who testified during the trial, the firm did its homework — but also cheated on the test.

“The defendant knew the rules, but he did not care,” said prosecutor, Reed Brodsky, in his summation. “Cheating became part of his business model.”

The origins of Mr. Rajaratnam’s case stretch back more than a decade, but a turning point came in 2006 during an investigation of a hedge fund run by Rengan Rajaratnam, Mr. Rajaratnam’s younger brother and a former Galleon employee. While reviewing e-mails and instant messages, Andrew Michaelson, now a member of the team that prosecuted Raj Rajaratnam, discovered incriminating communications between the brothers.

Rengan Rajaratnam, who has not been criminally charged, emerged – through several wiretapped conversations – as a colorful figure during the trial. On a call in August 2008, Rengan told his brother about his efforts to press his friend, a McKinsey consultant, for confidential information.

Rengan Rajaratnam called the consultant “a little dirty” and boasted that he “finally spilled his beans” by sharing secrets about a corporate client.  [NYTimes 5/11/11, CNBC 5/11/11]