Among those most recently charged were the billionaire Raj Rajaratnam, founder of the Galleon Group of hedge funds, and Danielle Chiesi, a hedge fund industry consultant, both of whom have denied wrongdoing and are facing trial later this year. Over all, nearly two dozen hedge fund managers, traders, analysts and corporate executives have been accused of profiting from illicit trading, in what the government emphasizes is a continuing investigation.
Since Mr. Lenowitz pleaded guilty in 2007, the mood in Congress and the courts has taken a turn toward more severe penalties for rich Wall Street figures accused of abusing their privileges and power.
Of the 13 people who faced criminal charges in the case involving Mr. Lenowitz, the longest prison term imposed so far was six and a half years; probation was by far the most common sentence. By contrast, recent white-collar criminals have received much longer sentences, including 20 years for Marc S. Dreier, a lawyer who defrauded his clients of millions of dollars, and 150 years for Bernard L. Madoff, who orchestrated the largest Ponzi scheme in history.
By pleading guilty, Mr. Lenowitz faces a potential prison term of 25 years — up to five years for conspiracy and up to 20 years for securities fraud. But under federal guidelines, his actual exposure is 46 and 57 months, before the judge considers other factors, including any previous criminal record, the amount of money involved and the significance of his cooperation.
The outcome of his sentencing, originally scheduled for Thursday but postponed to Feb. 4, will be of more than academic interest to defendants and defense lawyers in the insider-trading cases pending in the federal courts in New York.
The proceeding could also shed light on the specific role that Mr. Lenowitz played in helping prosecutors build subsequent cases, depending on how much the prosecutors and Judge Sidney H. Stein decide to say in open court.
The 2007 case was a breakthrough for the government, in large part because it prompted cooperation from experienced hedge fund figures like Mr. Lenowitz, who had worked on Wall Street for more than a dozen years and who had managed money at Chelsey Capital, an independent hedge fund.
The chain of tips that ended with Mr. Lenowitz began with Mitchel S. Guttenberg, an executive director of the stock research department at UBS and one of two sources of inside information who were charged in the case.
In 2001, Mr. Guttenberg alerted a friend, Erik R. Franklin, about potential upgrades and downgrades of stocks by the UBS research team. Such changes could affect stock value and the tips generated profits for those illegally trading on them.
Mr. Franklin regularly passed along Mr. Guttenberg’s tips to other people. During the years the UBS scheme continued, Mr. Franklin used the tips to make trades at Lyford Cay Capital, a small hedge fund open to senior executives at Bear Stearns, and at Chelsey Capital — where he shared his tips with Mr. Lenowitz.
Then, in 2003, Mr. Franklin set up a fund called Q Capital Investment Partners, with Mr. Lenowitz as his partner and investor. There, they later confessed, they continued to trade on the flow of information from UBS.
According to the Securities and Exchange Commission, Mr. Franklin made $5 million in illicit profit over five years for his various hedge funds and his personal accounts. Mr. Lenowitz made $100,000 in his personal accounts, according to the criminal charges to which he pleaded guilty.
They were among the 13 people accused by the S.E.C. of participating in the unusually intricate case, which involved two separate streams of inside information, from UBS and Morgan Stanley; a related kickback case involving initial public offerings of stock; and even a bribery scheme, in which one defendant paid two brokers to keep silent about his illicit trading.
The other defendants included three employees from Bear Stearns, an executive in Bank of America’s securities unit and a former Morgan Stanley compliance official, who had tipped her husband to details about the firm’s clients.
All those defendants ultimately pleaded guilty and were sentenced — except for Mr. Lenowitz.
Although he pleaded guilty in July 2007 to one count of conspiracy and one count of securities fraud, his sentence was quietly and indefinitely postponed.
In October 2007, while Mr. Lenowitz was out on $250,000 bail, his lawyer wrote a letter asking Judge Stein to allow Mr. Lenowitz to take his two children to visit his parents in Florida. That letter noted that Mr. Lenowitz “is now working cooperatively with the U.S. attorney’s office in its investigation of others.”
The lawyer, Alan Vinegrad of Covington & Burling in New York, wrote: “Because this letter refers to Mr. Lenowitz’s ongoing cooperation with the government, which to my knowledge has not been publicly disclosed, I respectfully request that this letter be filed under seal.”
The letter now appears in the court docket, but there is no explanation for why it is now publicly available. The docket also shows that an unidentified “sealed document” was filed with the court in July in connection with Mr. Lenowitz’s case.
On Tuesday, Mr. Vinegrad said he would not discuss the case or disclose the substance or content of that document.
Given the timing, it is unlikely that the sealed document is the government’s confidential account of Mr. Lenowitz’s assistance and a recommendation for leniency — a submission known as a 5K letter, after the relevant section of the federal legal code.
The case that ensnared Mr. Lenowitz — given the prominent names and emphatic statements from prosecutors and regulators at the time — could have served as an early warning to the hedge fund world that regulators were serious about cracking down on insider-trading abuses in their expanding but lightly regulated corner of Wall Street.
But it clearly didn’t: the recent criminal cases all contain accusations of insider trading that began well after the 2007 case made headlines.
The sprawling cases filed since October stretch from Wall Street to Silicon Valley and involve executives at hedge funds as well as some of the nation’s largest technology companies.
In all, criminal charges have been filed against 21 people, who have been accused of making tens of millions of dollars by trading on or passing along secret corporate information. Seven have pleaded guilty, and federal prosecutors said on Friday that they were negotiating plea agreements with three additional defendants.