UPDATE 7-US charges billionaire Rajaratnam with insider trading

* Several major stocks subject of insider trading

* Billionaire Galleon hedge fund partner among accused

* Also execs from IBM, McKinsey, Intel, New Castle

* Prosecutor labels it biggest hedge fund insider case

* First time wire taps used in Wall St insider trade case (Adds quotes from Rajaratnam's lawyer, Goel bail)

By Grant McCool and Edith Honan

NEW YORK, Oct 16 (Reuters) - Billionaire hedge fund founder Raj Rajaratnam and executives from some of the most prestigious U.S. companies were charged on Friday with the largest hedge fund insider-trading scheme ever.

Investigators said they used court-approved telephone wire taps for the first time in a Wall Street insider trading case, sending shivers through the hedge fund industry which has traditionally picked up and shared trading tips to make big profits.

At the center of the case are Rajaratnam, his Galleon hedge fund and two executives from hedge fund New Castle, which was a unit of Bear Stearns Asset Management before Bears Stearns Cos collapsed in 2008, but is still in operation.

Three executives from major American companies IBM (IBM), top consulting firm McKinsey & Co and the venture capital arm of chip giant Intel Corp (INTC.O) are also facing criminal charges.

"This is not a garden-variety insider trading case," Preet Bharara, the U.S. Attorney for Manhattan, said at a news conference. He said the scheme made more than $20 million in illegal profits over several years. here

One of the criminal complaints accuses Rajaratnam, 52, considered the richest Sri Lankan in the world, of conspiring with Intel Capital treasury department managing director Rajiv Goel and Anil Kumar, a director of McKinsey & Co. The alleged offenses took place over three years starting in January 2006.

Galleon had as much as $7 billion under management, the complaint said.

Early on Friday evening, a U.S. magistrate judge in New York said Rajaratnam may be released on a $100 million personal recognizance bond secured by $20 million in cash and property.

In a brief appearance, Rajaratnam sat in court with his arms folded. The judge restricted his travel to a radius of 110 miles from Manhattan and Rajaratnam, a citizen of both Sri Lanka and the United States, surrendered travel documents.

A prosecutor argued that Rajaratnam was a flight risk, but his lawyer Jim Walden said: "A court's going to learn there's a lot more to this case. There is no way that this man is going to flee."