The Raj Rajaratnam case may seem like an important case of insider trading involving a hedge fund in the US, but it is more important when it comes to illustrating how market participants comprehend their place.

Rajaratnam denies wrongdoing and has argued that investment advisors routinely speak to company insiders as they do research.

When Satyam's Raju pleaded guilty, he cut his losses immediately. By fighting the case, Raj has raised stakes. He is climbing an uphill task.

The amount under question is $45 million. The first question that comes to mind is how did a 22-per cent return generating $7-billion fund founder reach to create a network for funnelling information?

When money could be made ethically why should a fund manager rely on the easy way out?

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Even if we assume Raj is right about routine investigative research for companies, how will the state quantify what insider information made what money? What if it was the underlying trend that helped Raj and not the information?

This brings us back to the Dynegy case of 2004, when the judge was forced to reduce the sentence of Jamie Oli because his lawyers proved that the judge could not quantify information bytes with the market reaction.

Markets were only efficient in theory and there was mathematical proof available for market inefficiency. If Raj's lawyer could go the 'inefficient' way, they can actually challenge an insider's consistent ability to make money.

Pitching for market inefficiency could prove that Raj was indeed doing investigative work and not unethical bungling.

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Raj's lawyers could also cite our recent paper published on SSRN regarding Temporal Changes in Shiller's exuberance data sighting that inefficiency itself could be generated by time duration data and not just price or earnings information.

This makes inside information a weaker variable.

Well all this could reduce Raj's sentence, as the real debate is about whether an unethical intention was there.

The wiretaps are a spoiler as they prove that intention to seek the information was more like tips than information for enhancing research capabilities.

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This is a landmark case if Raj comes out unscathed because the case could redefine ethics by suggesting that seeking material or non-public information may not be unethical because information like prices are inefficient.

Betting on Raj is like betting against odds.

What might work against him is not whether he can prove that he overdid investigative research but the time when the society is looking to punish players who fix the game.

The society is trying to be more ethical and is searching for values now and Raj's case reeks of poor judgment. Let's see if lawyers can turn it around.

The author is CMT and Co-Founder, Orpheus Capitals, a global alternative research.