The fate of hedge fund founder Raj Rajaratnam was in the hands of a jury on Monday in the biggest Wall Street insider trading trial in decades, a case that featured FBI phone taps and former friends who testified against him.

Jurors began deliberations shortly after midday in the closely watched Manhattan federal court trial. The government's case has relied heavily on secretly recorded telephone conversations, while the defense argues that the Galleon Group founder's trades were guided by analysis and public information.

Prosecutors accuse Rajaratnam of running a corrupt and complex web of highly placed tipsters between 2003 and March 2009 to make an illicit $63.8 million on stocks such as chipmakers Advanced Micro Devices Inc, Intel Corp and Internet search engine Google Inc.

U.S. District Judge Richard Holwell, in his instructions to jurors who have heard seven weeks of evidence, said that whether you approve or disapprove of the secret FBI recordings, they must be considered in deliberations.

The jury of 12 and four alternates does not know that Rajaratnam fought unsuccessfully last year to have the phone taps suppressed from the trial.

The judge reminded the jury to use common sense in deliberations and that the government had the burden of proof on each of the 14 counts -- five counts of conspiracy and nine of securities fraud.

For a guilty verdict, the jurors must be unanimous.

'HAS TO BE TRUE'

Rajaratnam's October 2009 arrest was part of a sweeping investigation that prosecutors have described as the biggest probe of insider trading at hedge funds on record.

The attention given to the case was reminiscent of the big insider trading scandal of the mid-1980s involving speculator Ivan Boesky and junk bond financier Michael Milken.

In the broad Galleon case, 20 out of the 26 executives, traders and lawyers charged have pleaded guilty to criminal charges. Three of them agreed to testify at trial against Sri Lankan-born Rajaratnam.

To convict Rajaratnam, the government's evidence must convince jurors beyond a reasonable doubt that he received material nonpublic information from people who had a duty not to disclose it, and that he knew it was wrong.

If convicted, Rajaratnam could be sentenced to up to 25 years in prison.

Rajaratnam's trial began on March 8. He is the only defendant to go to trial so far. A separate trial of four other defendants is scheduled to start on May 16.

Earlier on Monday, a prosecutor finished his closing argument in rebuttal to last week's defense summation.

Referring to defense arguments that those who testified against Rajaratnam did not tell the truth, assistant U.S. Attorney Jonathan Streeter told jurors that there was so much corroborating evidence that the trial testimony has to be true.

Defense lawyers said Rajaratnam was a successful, aggressive money manager who used a wide array of research, analysis and public information to make his trading decisions.

Rajaratnam's main lawyer, John Dowd, said in his closing statement to the jury last week that there were multiple instances where the hedge fund manager had taken a position before the recorded conversation.

We have shown you other times when Raj didn't trade at all, and when he traded in the opposite direction of what was communicated on the calls, Dowd said.

He argued that the information at issue was public, not secret, and Rajaratnam should be acquitted.

The case is USA v Raj Rajaratnam et al, U.S. District Court for the Southern District of New York, No. 09-01184.

(Reporting by Grant McCool and Jonathan Stempel, editing by Matthew Lewis)

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