Snitch! What's worse: Prison or being an FBI informant?

I know guys on their way to prison, currently in prison, out of prison and a lot who never got caught.

Four years ago, my former boss, Raj Rajaratnam, received 11 years, which, at the time, was the longest sentence ever handed down for violating insider-trading laws. But the people serving the longest sentences are those who cooperated with the FBI.

On the streets, it's called a snitch. Downtown, they call it an informant.

And when the FBI decides they want you, they pounce quickly. They sneak up behind you while you're in line at Starbucks and wait until it's your turn to order. And then, when the cashier asks you how you take your coffee, they'll answer for you: "Two sugars and cream… Can you come with us?" It's a common tactic used by the authorities. Personally I know four people this has happened to — two at Starbucks, one at Dunkin Donuts and one at a Subway sandwich shop. And none of them had any idea it was coming.

People wait in line in the morning at a Dunkin' Donuts chain restaurant in New York City.
Getty Images
People wait in line in the morning at a Dunkin' Donuts chain restaurant in New York City.

The good news is that your house wasn't raided while your wife and kids were still in bed (this happened to Mike Kimelman), but the bad news is they want to talk to you — and your life just changed forever.

Read MoreQ&A with Mike Kimelman: 'They showed up at my house with German Shepherds'

And now, it's time to play "Let's Make a Deal." This is what's on the table: cooperate and become an informant or go away for a very long time. The biggest fear for someone facing this decision is family.

Recently I had lunch with a friend who cooperated with the authorities. "It's not good, Turney," he said, looking across at me in the East Village restaurant. If he'd pleaded guilty initially, he would have been away and home already.

"I have no idea who my friends are," he said after the waitress took our menus. "I don't talk to anyone." He seemed to just be blurting things out unprompted. "I don't even like to walk down the street anymore."

When I got home, I called my daughter to check in. Her mom asked me how the lunch was — she knew where I was. I felt really bad, I told her. He looks like a beaten man. I feel like he's still serving his sentence.

"Yeah, but you're not supposed to tell on your friends," she said. "It's the rules."

"Okay," I said. "So, if you were faced with cooperating or not seeing our daughter for 3 to 5 years — what would you do?"

"Oh," she said. "I see your point."

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What would you do? Would it change your decision if you had a family? It's a tough call. I can't stand the thought of being away from my daughter for more than a day. And that's the choice a lot of guys are faced with who got caught up in this insider-trading ring. Either you do the time away from loved ones or face the harsh reality of public shaming. And it starts early, way before it hits the newspaper.

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In 2010, I paid a visit to an old friend who runs his own trading shop. I've known him for years and we try and do a face-to-face a few times a year just to catch up. After I made my way past reception, I weaved in and out of the trading desks to his wide open, brilliantly lit corner office. He flashed a smile as I entered and took a seat on the white leather couch. Once he eventually got off the phone, he told me to close the door. It was a strange request, considering he always keeps his door open; he always wants to hear what's happening on the trading floor.

"Have you talked to Jerry lately?" my friend asked.

"No," I said. "Not in years."

"Well don't," he said. "And if you have to … Be very careful what you say."

"What do you mean?"

"He's wired up," he said.

It's not the first time I'd been warned about talking to a certain individual, but this caught me off guard. I was no longer working in the business and it seemed punitive. This guy, Jerry, had already been assumed guilty by his peers. The word on the street was to avoid him at all costs. The guy didn't stand a chance. I never really trusted Jerry, but now it seemed like no one did. Jerry eventually left the business. He told his friends it was to spend more time with his family, but everyone knew the truth.

It seems like when someone decides to cooperate and become an informant, they are still serving a sentence: a life sentence. It's a personal prison. So while you might be able to avoid the horrors of being locked up inside, you can't escape the guilt and shame of being a snitch. And the days are long. If you aren't banned, maybe you're trading your own money, but no one will talk to you. You worry about how your kids are treated at school. A quick trip to the deli is accompanied by several glances over your shoulder. And at the dinner table you're never sure what your family is thinking.

Read More Bernard Kerik: Going to prison is like 'dying with your eyes open'

I decided to call my friend I met in the East Village restaurant. I had to ask.

"Would you do it again? Would you cooperate?" I said.

"I don't know," he said. "But I'm moving. There's nothing left here for me in New York."

(Names in this article have been changed to protect the informants' identities.)

Commentary by Turney Duff, a former trader at the hedge fund Galleon Group. Duff chronicled the spectacular rise and fall of his career on Wall Street in the book, "The Buy Side," and is currently working on his second book, a Wall Street novel. He is also featured on the CNBC show, "The Filthy Rich Guide." Follow him on Twitter @turneyduff.

Want to know more about what life is like on the inside? Tune in to CNBC tonight at 10pm ET/PT for the documentary "White Collar Convicts: Life on the Inside," featuring interviews with former Tyco chief Dennis Kozlowski, former NYPD commissioner Bernard Kerik, former Qwest CEO Joseph Nacchio and former hedge-fund trader Mike Kimelman.

Here's a clip with tips for white-collar convicts facing prison. Rule No. 1: Drop the attitude or you're not going to make it. Seriously.