A former expert consultant to hedge funds pleaded not guilty to criminal conspiracy charges arising from a federal probe of insider trading.

Don Ching Trang Chu, who once worked at Primary Global Research LLC, entered the plea on Wednesday before U.S. District Judge Jed Rakoff in the federal court in Manhattan.

The government accused Chu, 57, of conspiracy to commit securities fraud and conspiracy to commit wire fraud.

Prosecutors charged the Somerset, New Jersey, resident with passing tips to Richard Choo-Beng Lee, who ran a now-closed California hedge fund Spherix Capital LLC, beginning in 2008.

Lee and Ali Far, who also ran Spherix, pleaded guilty to trading on inside information in connection with a separate insider trading probe centered on Galleon Group founder Raj Rajaratnam. They also agreed to cooperate with the government.

Companies that were subjects of inside tips from Chu included chipmakers Atheros Communications Inc and Broadcom Corp and Canada's Sierra Wireless Inc, the government has said.

Plea negotiations with the defendant are still ongoing, Assistant U.S. Attorney David Leibowitz said at the hearing.

James DeVita, a partner at Day Pitney LLP representing Chu, confirmed the talks after Wednesday's hearing. He said Chu waived his right to first present his case to a grand jury, saying there was not any advantage to doing so.

Many defendants have been arrested, have been charged or pleaded guilty since November as part of a federal crackdown on the solicitation of illegal stock tips from consultants working for so-called expert network firms.

These firms help hedge funds obtain information about public companies, often in the healthcare and technology sectors.

Insider trading could result when trades are made on leaked details that are considered material, nonpublic information.

Several other people once affiliated with Mountain View, California-based Primary Global have been implicated.

Chu's case is one of many in the insider trading probe in which prosecutors used covert wiretaps to gather information about alleged wrongdoing.

Leibowitz told Rakoff there are recordings of Mr. Chu, and many wiretap intercepts in this case.

Two federal judges in Manhattan have approved the use of similar phone taps in other insider trading cases.

Addressing the issue of wiretaps, DeVita told Rakoff it is not a foregone conclusion that such evidence would be admissible against his client.

Rakoff responded that he had an open mind on the issue.

A conference in the case has been set for June 28.

Rajaratnam's insider trading trial is in its eighth week. Jury deliberations began on Monday.

The case is U.S. v. Chu, U.S. District Court, Southern District of New York, No. 10-mj-02625.

(Reporting by Jonathan Stempel; Editing by Steve Orlofsky and Matthew Lewis)

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