When the Federal investigators want to infiltrate the super-secretive world of hedge funds to expose insider trading, they try similar methods used to take down the Mafia, Bloomberg News' Patricia Hurtado reported.

Sounds exciting, right?

This sort of investigation conducted by the New York FBI office has been coined "Perfect Hedge," the report said.

Not only does this investigative process include using court-authorized wiretaps of phones, informants and cooperating witnesses, but also conducting surveillance of targets on street corners and gyms they frequent. (Yes, even the gym!)

What's more is agents are strongly encouraged to learn every possible detail about fund managers suspected of insider trading and those they would like to bring in as cooperating witnesses. 

This goes as far as knowing the brand of coffee they prefer (Dunkin or Starbucks) and their favorite lunch spot, the report said. 

Of course, the really big weapon Federal investigators use to uncover insider trading circles is the use of phone wiretaps. 

This was recently evidenced in the Raj Rajaratnam Galleon insider trading scandal where agents captured more than 2,400 conversations between Rajaratnam and his associates, friends and alleged accomplices.  Forty-five of those conversations were played during the trial, the report said.

The thing is the FBI can't simply use a wiretap without first having probable cause. 

So what they do is find a cooperative witness to agree to wear a wire to record an incriminating conversation so they can proceed with using court-authorized wiretaps. 

Again, they are able to find someone to cooperate by knowing every detail about that person including their crimes and personalities in order to persuade them to cooperate with the investigation, the report said.

Since the onset of the financial crisis, there has been a major crack-down on insider trading.  At least 56 people have been charged with insider trading.  More than 50 of those have either pleaded guilty or have been convicted, the report said.  Wiretaps were used in many of those instances. 

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