(Bloomberg News) Former Galleon Group LLC hedge fund trader Zvi Goffer was convicted on all counts by a federal jury in Manhattan in the second trial to result from the U.S. government's nationwide crackdown on insider trading.

Goffer's brother Emanuel and Michael Kimelman were also found guilty of conspiracy and securities fraud today by a jury that began deliberations June 2. The verdict comes about a month after Goffer's boss, Galleon co-founder Raj Rajaratnam, was found guilty in the same courthouse of directing the biggest hedge fund insider trading scheme in history.

Rajaratnam and Zvi Goffer were key players in what prosecutors said were three overlapping insider-trading conspiracies that implicated banks, technology firms, hedge funds and so-called expert networking firms.

Goffer, his brother and Kimelman were charged with using tips from two lawyers to profit on trades in 3Com Corp., Axcan Pharma Inc., Kronos Inc. and Hilton Hotels Corp. Jurors heard recordings of wiretapped phone calls and testimony from witnesses who pleaded guilty in the case and were cooperating with the government.

Prosecutors said the three men, who co-founded Incremental Capital LLC after Zvi Goffer was fired by New York-based Galleon in 2008, used information that the lawyers, then working at the Boston-based law firm Ropes & Gray LLP, learned about pending acquisitions through their work there.

SEC Lawsuit

The U.S. Securities and Exchange Commission claimed in a related lawsuit that the alleged scheme resulted in at least $20 million in illicit profits. Fourteen people were charged in the purported insider trading ring. Ten have pleaded guilty, and one is a fugitive.

Zvi Goffer's lawyers argued their client sometimes bluffed about having inside information to impress other Wall Street traders. Lawyers for Emanuel Goffer and Kimelman said that their clients weren't part of any alleged conspiracy with Zvi Goffer.

They face as long as 20 years in prison on the most serious charges. Zvi Goffer's sentencing is set for Sept. 21; the other two defendants are scheduled to be sentenced Oct. 7. All defendants remain free on bond pending sentencing.

Rajaratnam, who was convicted on all 14 counts against him, faces as long as 19 1/2 years in prison when he's sentenced on July 29.

In addition to the Rajaratnam and Goffer trading schemes, a third ring centered on so-called expert networkers is the focus of a trial under way in Manhattan federal court. A former Primary Global Research LLC consultant, Winifred Jiau, faces insider-trading charges for allegedly giving inside information to financial industry clients at hedge funds.

Prepaid Phones

At Goffer's trial, which began May 18, former Ropes & Gray attorney Brien Santarlas told jurors that he and another lawyer at the firm, Arthur Cutillo, used prepaid mobile phones to pass on news about pending mergers in exchange for envelopes stuffed with cash.

Prosecutors said the lawyers gave the tips to Jason Goldfarb, a Brooklyn, New York, lawyer who passed the information to Zvi Goffer.

In a Jan. 2, 2008, wiretap, Zvi Goffer is heard calling himself "responsible for a honeymoon and a kitchen" in a conversation with Goldfarb. Prosecutors told jurors that Goffer was referring to the $25,000 he gave to Santarlas and Cutillo for tips on a deal involving 3Com. Goldfarb, Santarlas and Cutillo have all pleaded guilty.

Prosecutors said the ring also traded on tips from Gautham Shankar, an ex-trader at New York-based Schottenfeld Group LLC. Shankar pleaded guilty to two criminal counts in 2009 and has yet to be sentenced. On June 8, Shankar was ordered by a judge in the SEC's lawsuit to pay almost $278,000.

Impress Rajaratnam

Zvi Goffer also used the tips to impress Rajaratnam and to get a job at Galleon, where he worked for part of 2008, according to the government.

Prosecutors told jurors that Zvi Goffer made incriminating phone calls in the presence of Emanuel Goffer and Kimelman, in which he discussed the sources of the insider tips and ways to mislead regulators who might ask questions about their trades.

The case is U.S. v. Goffer, 10-cr-00056, U.S. District Court for the Southern District of New York (Manhattan).