Rajaratnam indicted for insider trading

* Two face 17 counts in hedge fund/insider trading case

* Lawyer says Rajaratnam is innocent, keen to fight case

* Rajaratnam founded Galleon

* Case involves employees of some top U.S. companies

New York, (Reuters) A U.S. grand jury on Tuesday indicted Galleon hedge fund founder Raj Rajaratnam and co-defendant Danielle Chiesi on charges of securities fraud and conspiracy in an insider trading case involving employees of some of America's best-known companies.

The indictment in Manhattan federal court, two months after the pair were charged along with others in a coast-to-coast probe on October 16, lists 17 counts of conspiracy to commit securities fraud and securities fraud.

Sri Lankan-born Rajaratnam and Chiesi, who worked with New Castle LLC hedge fund, are the only indictments returned so far in the case, which expanded in November to include 20 people facing criminal and civil charges.

Billionaire Rajaratnam, a U.S. citizen who is free on $100 million bail, is the most prominent figure in what U.S. prosecutors described as the biggest hedge fund insider trading case ever.

His lawyer has consistently said he would fight the charges. "Mr Rajaratnam is innocent and looks forward to his day in court when a jury of his fellow citizens will examine and evaluate all of the evidence," Rajaratnam's lawyer, John Dowd, said in a statement after the indictment was returned.

A lawyer for Chiesi could not immediately be reached for comment.

Most of the accused had expertise in tech stocks, and the allegations included passing inside information on earnings announcements, takeovers and contracts on 10 companies, generating more than $30 million in illegal profits, according to prosecutors. Six traders or lawyers have pleaded guilty to charges in the investigation, which ensnared employees of IBM Corp, McKinsey & Co management and former lawyers of the Ropes & Gray law firm.

In the overall case, inside trading allegedly took place in shares of Google, Sun MicroSystems, Advanced Micro Devices, Polycom, Hilton Hotels, Intel, Clearwire, Akamai, Atheros and IBM, among others. REUTERS