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Federal authorities have been very busy cracking down on insider trading. Over the last three years, the government has charged 75 people with trading securities based on non-public information. Investigators chalk up their success to a decision to pursue the crime the way they take down the Mafia and drug cartels. Increasingly, they're using wiretaps and informants.

NPR's Ailsa Chang caught up with some of the lead investigators.

AILSA CHANG, BYLINE: The story behind how the government decided to go after insider trading as hard as it goes after the mob is really just a story about dead ends.

DAVID CHAVES: It was a product of sitting around the table and saying: OK, nothing else has worked. Where do we go now?

CHANG: That's FBI agent David Chaves. We're sitting in the FBI's New York field office in downtown Manhattan. Next to him is his colleague Patrick Carroll. These guys have taken down Bernie Madoff and former WorldCom chairman Bernard Ebbers.

But when they started getting whispers more than 10 years ago that there was an epidemic of insider trading at hedge funds, Carroll says they were stumped.

PATRICK CARROLL: We had people who were telling us things, but we didn't have anybody who was in a conspiracy that was going to tell on what the others did.

CHANG: What they needed were real sources, people who did business with the insider traders. But, as Carroll says, how do you get high-flying financiers with everything to lose to flip and cooperate with you?

CARROLL: Here's the product I'm selling: Tell on your friends, give me your money and go to jail. How would you like to sell that product?

CHANG: And selling that product in a tight-knit circle like the hedge fund industry seemed almost impossible. Penetrating these networks would have been really tough, because there was an instant suspicion of outsiders.

What the feds needed was something to make people cooperate. And in early 2008, they decided: Let's do a wiretap. Many of them, like Carroll, were longtime organized crime and narcotics investigators. They knew, in those worlds, when you needed leverage to make someone cooperate, you recorded them planning something criminal.

CARROLL: Once we did that, now when we knock on your door, it's not like, oh, the FBI's here, big whoop. Lie to them or just ignore them, or hire a lawyer and they'll go away. Now it's like, oh, boy. I have a problem.

CHANG: People close to the investigations say at least a dozen individuals have decided to cooperate after discovering the government had wiretap evidence against them. And these recordings weren't just useful for recruiting cooperators. They also provided powerful, direct evidence of insider trading.

For Andrew Michaelson, that was the perfect break. For almost two years before the wiretaps, he had been leading an investigation by the Securities and Exchange Commission into Raj Rajaratnam. Rajaratnam was a hedge fund manager whom the government would later accuse of making more than $72 million on inside trades.

Without wiretaps, Michaelson says it's very hard to nail top hedge fund executives.

ANDREW MICHAELSON: Hedge funds, particularly long/short equity funds, are buying and selling stock all the time. So the fact that the hedge fund, say, bought a stock right after a phone call means less, because they had also bought the stock just before the phone call.

CHANG: But wiretaps allowed investigators to listen in on the skyscrapers of midtown Manhattan for the first time - like here, where Rajaratnam actually disclosed over the phone that he got an inside tip and was going to trade on it.

(SOUNDBITE OF RECORDED PHONE CALL)

RAJ RAJARATNAM: Now, I heard yesterday from somebody who's on the board of Goldman Sachs that they are going to lose $2 per share.

CHANG: Rajaratnam was convicted last May after a trial featuring more than 2,400 taped phone conversations. Now prosecutors are said to be circling around another hedge fund giant: billionaire Steven Cohen. And investigators say these cases and others cropped up because a bunch of scared people heard their voices on wiretaps and started coughing up information.

Ailsa Chang, NPR News.

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