Tippers or tippees?

Hedge fund probe: The widening US insider trading probe brought more arrests on Thursday. Three were technology firm employees who, together with another, earned over $400,000 moonlighting as expert consultants. That kind of gig sounds a bit too good to be true. And, they are now alleged to have shared inside information with hedge funds and others. The key question is still which bigger fish the enforcers are after.

Preet Bharara, the US attorney for Manhattan, alleges that staffers at Dell, AMD, Flextronics and TSMC distributed inside information. They got their consulting work through Primary Global Research, a California firm that boasts a network of such experts.

As the scale of the investigation into insider trading becomes clearer, it would be an anti-climax if mid-level executives at tech firms were the ultimate targets. But it’s not clear who is. An absence of evidence isn’t stopping the popular vote going to Steven Cohen of SAC Capital, a big enough fish to own Damien Hirst’s pickled shark as part of a probably unmatched collection of cutting-edge contemporary art. But the reality is that nothing so far goes directly to SAC’s Jeff Koons-adorned lobby.

Perhaps lower profile funds are big enough catches on their own. One known target was Galleon Group, whose founder Raj Rajaratnam was charged more than a year ago with insider trading. Others could be the likes of Diamondback Capital Management and Level Global Investors, two Connecticut funds run by SAC alumni and raided by the FBI last month - though neither has been accused of anything, and they are among many funds, including SAC, who have received requests for information.

It might even be that Bharara fancies changing the way financial business is done, in much the same way former New York Attorney General Eliot Spitzer did with bank research. The use of expert networks may be standard practice these days but it isn’t hard to make it look bad, especially when it involves current employees of the companies being researched. It would, however, be much tougher to make the broader case that piecing together a picture from disparate nuggets of legally-obtained information is shady.

Whether eventually proven to have broken the law or not, the arrested tech experts may now be wishing they’d looked more skeptically at their consulting windfalls.

Hedge fund managers may be relieved it wasn’t their turn this time - but they should remember the best fishermen are usually very patient people.