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A large insider trading probe in the United States threatens to batter the financial industry's already fragile reputation and increase market jitters at a time when investors are on heightened alert over debt troubles in Europe and currency tensions across the globe.

U.S. authorities are in the late stages of a long-running criminal and civil investigation involving hedge fund traders, bankers and consultants, according to several reports.

No charges have been filed and no allegations proven, but further accusations could shake the confidence of average investors who remain wary of the stock market after the turmoil of the financial crisis.

The investigation, first reported in The Wall Street Journal, reflects a newly aggressive approach to insider trading by Preet Bharara, the U.S. attorney for the Southern District of New York. As the top federal prosecutor in Manhattan, Mr. Bharara handles everything from terrorism trials to narcotics cases. (One of his predecessors in the post was Rudolph Giuliani.)

In a speech last month to a New York lawyers' association, Mr. Bharara singled out insider trading as an area of priority for his office within the world of white-collar crime.

"Illegal insider trading is rampant and may even be on the rise," he said. Such activity "feeds the pervasive crisis of confidence in our financial system."

Mr. Bharara called inside information a "financial steroid" that sophisticated investors use to achieve an illegal edge in their trading. He signalled that the topic would become even more noteworthy in the future, remarking that his office and the Federal Bureau of Investigation recently added new resources to the pursuit of such crimes.

The current probe involves federal prosecutors, the FBI, and regulators at the Securities and Exchange Commission. It appears to target a web of alleged illegal activity among a variety of financial professionals who passed insider information related to technology and health care stocks.

It's unclear whether the investigation encompasses accusations of a single sprawling scheme or a series of smaller unrelated plots. At least some of the inquiry is an outgrowth of another massive insider trading probe focused on hedge fund Galleon Group.

Its co-founder, Raj Rajaratnam, was arrested in 2009 and will go on trial early next year. Fourteen people have already pleaded guilty to criminal charges stemming from the Galleon probe. Mr. Rajaratnam has pleaded not guilty and denied wrongdoing, and no allegations have been proven.

In that inquiry, authorities took the unusual step of seeking wiretaps to record thousands of conversations. In the past, such recordings have played starring roles in prosecutions of drug traffickers and organized-crime figures.

It's likely that recorded conversations will also figure in the current probe. In his speech last month, Mr. Bharara noted the difficulty of proving insider trading cases in a world where trades take place in fractions of seconds and every market rumour is chewed over by blogs and online commentators. "Recordings are the absolute best evidence, and so we will not shrink from using them," he said.

One intriguing element of the current investigation is its focus on so-called "expert networks." For a fee, such companies connect hedge funds and mutual fund firms with current and former executives from publicly traded companies. According to The Wall Street Journal, several such outfits are under scrutiny, including a California-based firm whose leadership used to work at Intel Corp. An official from that firm would not comment to The Journal.

Other strands of the probe seem to target more traditional forms of dealing in inside information. Such activity tends to spike when companies are in the midst of a merger or acquisition, which provides a trigger for a stock price to move sharply higher or lower.

The Journal noted that prosecutors are exploring whether investment bankers at Goldman Sachs Group Inc. leaked information about pending transactions in ways that benefited certain investors. A Goldman spokesman declined to comment.

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