Rajaratnam's Brother in Plea Talks With Feds

Rengan Rajaratnam, founder of Sedna Capital Management and the younger brother of imprisoned hedge fund founder Raj Rajaratnam, exits federal court in New York.

Victor J. Blue | Bloomberg | Getty Images

The younger brother of convicted inside trader Raj Rajaratnam—who was himself indicted on insider trading charges in March—is in talks with federal prosecutors over a possible plea agreement, according to a court filing made public Monday.

Rengan Rajaratnam, 42, who worked as a portfolio manager at the Galleon Group of funds founded by his brother, is accused of illegal insider trading involving the stocks of Intel, Advanced Micro Devices and Clearwire, among others. He pleaded not guilty to a seven-count federal indictment earlier this year.

(Read More: SAC Capital Investors Could Pull Billions in Quarter)

Now, in a letter to the court dated May 30 but made public Monday, Assistant U.S. Attorney David Massey confirms the two sides are in plea negotiations that began shortly after Rengan Rajaratnam's arraignment in March.

"In order to facilitate plea discussions with the defense," Massey writes, "the government provided a binder of key wiretap transcripts, summaries of trading records and other significant evidence to the defense."

Soon after that, the plea negotiations began, the letter says.

(Read More: Trail to a Hedge Fund, From a Cluster of Cases)

U.S. District Judge Naomi Reice Buchwald has agreed to delay a hearing in the case that was scheduled for Tuesday so that the plea negotiations can continue. Rengan Rajaratnam is now due back in court on July 30.

His older brother, Galleon co-founder Raj Rajaratnam, is serving an 11-year prison term. He is appealing his 2011 conviction on 14 counts of conspiracy and securities fraud.

_ By CNBC's Scott Cohn