Huge Insider Trading Probe Gains Steam—and a Name

On the same day that federal authorities announce a new arrest and a new guilty plea in their growing hedge fund insider trading probe, CNBC has learned that the FBI has decided to give the investigation a name: Operation Perfect Hedge.

Raj Rajaratnam
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Raj Rajaratnam

The investigation, which has already lead to 47 arrests and 31 guilty pleas, has added a new dimension to traditional insider trading cases by using wiretaps and undercover recordings.

The first trial in the investigation, involving billionaire hedge fund mogul Raj Rajaratnam, is in its sixth week in New York.

Rajaratnam's attorneys fought unsuccesfully to keep undercover audio recordings out of the case. He has pleaded not guilty to 14 criminal counts, in a case that has included some 40 audio exhibits—(Listen to those wiretaps here).

The latest person arrested is former Frontpoint portfolio manager Joseph "Chip" Skowron, charged with conspiracy, securities fraud and obstruction of justice after allegedly trading on inside information from a consultant for Human Genome Sciences, then trying to buy the consultant's silence. The consultant, French physician Yves Benhamou, has agreed to plead guilty and cooperate with authorities.

An FBI source says the name "Perfect Hedge" was chosen because that is what the alleged offenders thought they had—a perfect hedge, or an investment with no risk.