Leon G. Cooperman, one of the early titans of the hedge fund industry, is gearing up for the biggest fight of his career: preserving his Wall Street legacy as regulators accuse him and his multibillion-dollar firm of insider trading.

The stakes are high, too, for the Securities and Exchange Commission, which on Wednesday sued Mr. Cooperman, a 73-year-old billionaire, accusing his firm, Omega Advisors, of reaping $4 million in illegal profit by using nonpublic information about an energy deal in 2010. The case is the most prominent to be brought by the agency since a court ruling that narrowed the definition of insider trading.

Hours after the civil complaint was filed, Mr. Cooperman fired back with a detailed five-page rebuttal sent to investors. He followed with a defiant conference call, opening with an off-color joke about an 80-year-old man bragging about having sex with an 18-year-old woman. He told investors on the call that he had refused to settle and that he would fight the S.E.C. in court.

The stage is set for what is expected to be a no-holds-barred legal battle between a gruff, outspoken investor and an agency that has come under criticism for not taking more cases to trial.