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Billionaire activist-investor Carl Icahn gives an interview on FOX Business Network's Neil Cavuto show in New York February 11, 2014 file photo.Brendan McDermid/Reuters

Of all the insider-trading investigations in recent years, this appears to be one of the strangest.

First, there's the cast of characters. U.S. authorities are reportedly scrutinizing the trading activity and phone records of Carl Icahn, the legendary corporate raider; Phil Mickelson, one of the world's most famous golfers; and Billy Walters, a successful Las Vegas sports gambler.

Mr. Icahn and Mr. Mickelson have never met, but both know Mr. Walters. Investigators are probing a series of trades made in 2011, when Mr. Icahn proposed a buyout of Clorox Co., as well as other transactions without a connection to Mr. Icahn, according to The Wall Street Journal.

The plot thickens when you go into the details. Investigators are searching for evidence to back their theory that Mr. Icahn may have passed information about his investment in Clorox to Mr. Walters, who could have told Mr. Mickelson.

Mr. Icahn told the Journal that any suggestion he did something improper was "inflammatory and speculative" and that his firm always observed the legal requirements in its activities. A lawyer for Mr. Mickelson said his client wasn't under investigation, while Mr. Walters declined to comment. No formal allegations have been filed yet.

There are several obstacles here. Insider trading cases tend to hinge on two things: proving that secrets were spilled, and proving that the person spilling the secrets had a duty to keep them confidential.

This particular probe, already three years old, faces trouble on both fronts. Before the case became public, federal agents were considering tapping the phones of those under scrutiny in a search for evidence of wrongdoing, according to one report. They also tried to coerce a senior colleague of Mr. Icahn's to co-operate, but "shifted gears when they lacked the leverage to do so," reported The New York Times. So for now, there's no clear sense of how a conspiracy may have worked.

Just as important: would it even be considered illegal insider trading in the first place? Mr. Icahn's intentions and plans are not generally considered confidential information about a target company (unlike, say, the contents of that firm's upcoming earnings reports). Prosecutors would have to show that any revelation somehow damaged the shareholders of Mr. Icahn's company, legal experts say.

Then again, U.S. authorities did not amass a fearsome track record in insider-trading cases – more than 80 convictions and zero acquittals in Manhattan federal court since 2009 – by chance. In such situations, they are not easily deterred, which suggests this strange tale may be far from over.

Editor's Note: Billy Walters's last name was spelled incorrectly as Waters in the headline and text of an earlier version of this post. This version has been corrected.

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