The case, in which a lawyer and a trader were accused of trading ahead of mergers and acquisitions, is both recognition that Wall Street is wired through New Jersey and testimony to the groundwork laid by New Jersey U.S. Attorney Paul Fishman.

"This is the largest insider-trading case to come out of this district but it's not the last," Fishman said as he announced the charges against trader Garrett Bauer and lawyer Matthew Kluger at a news conference in Newark, New Jersey, on Wednesday.

In the government's crackdown of insider trading in the last three years, nearly all of the cases have come from federal prosecutors in the Manhattan U.S. Attorney's office, long considered the most experienced in bringing sophisticated financial fraud cases.

Indeed, the Securities and Exchange Commission routinely gave its best information to the Manhattan office even if there was a big New Jersey connection, according to Herbert Stern, a partner at Stern & Kilcullen and a New Jersey U.S. Attorney in the 1970s. "It's an accomplishment that none of his predecessors, including me, were able to achieve," Stern said.

LAYING THE GROUNDWORK

Fishman said he reached out to financial regulators after he was sworn in as U.S. Attorney in October 2009. "I spoke to all of them about our office's interest in and ability to handle these kinds of sophisticated cases," Fishman said in an interview with Reuters Legal. "I'm delighted the partnership is proving as successful as it is."

Before taking office, Fishman already had established professional relationships with some of the key people at the SEC. They included enforcement director Robert Khuzami; deputy director of enforcement Lorin Reisner; and New York regional director George Canellos. He also talked with the heads of specialized enforcement units created by Khuzami in January 2010. One of them was Daniel Hawke, the SEC's Philadelphia regional director, who was named to head the Market Abuse Unit, whose trading analysis ultimately led to the indictment filed by Fishman's office on Wednesday.

Bauer and Kluger are accused of trading on information Kluger gained at three of the country's most prominent law firms. In the last five years, while Kluger worked at Wilson Sonsini Goodrich & Rosati, a firm best known for representing technology companies, the scheme allegedly netted more than $32 million. Prosecutors also allege that Kluger stole information while working at two well-known Wall Street firms, Skadden, Arps, Slate, Meagher & Flom and Cravath, Swaine & Moore.

Bauer conducted some of the alleged illegal trading from his condominium on the Upper East Side of Manhattan, according to the complaint, which could have given prosecutors in Manhattan jurisdiction.

But there are also connections to New Jersey that Fishman said gives his office jurisdiction. The complaint, for example, noted that Bauer's trades were processed through computer servers maintained by a subsidiary of Goldman Sachs in Jersey City, New Jersey. At the news conference, Fishman signaled that the growth of financial data processing in New Jersey would mean more white-collar fraud cases filed by his office. "This district is where Wall Street is wired," he said.

In addition to having jurisdiction over certain financial-fraud cases, Fishman said his office has the ability to handle them. Last May, he formed an economic crime unit to conduct "large-scale, complex financial fraud investigations and prosecutions."

Since putting his team in place, Fishman said he has worked on at least eight cases with the SEC, including one involving an $880 million Ponzi scheme that has resulted in three guilty pleas.