For Raj Rajaratnam, the billionaire hedge fund manager charged with trading on inside information, legal problems are nothing new.

In 2005, he paid $20 million in back taxes, penalties and interest to settle a federal investigation into a sham tax shelter that he used, according to a previously undisclosed lawsuit. His Galleon Group funds were entangled in an earlier fraud case, and were found to have violated Securities and Exchange Commission rules.

Now federal prosecutors in Manhattan have charged Mr. Rajaratnam and five other people with insider trading. They have wiretaps and a cooperating witness to support their case.

But both the case against Mr. Rajaratnam and the man himself are more complex than they may first appear. Mr. Rajaratnam and Galleon trade assets rapidly, gather information rapaciously and focus on short-term gains. But those tactics are not illegal. The credibility of a crucial witness against him has already been seared, and Mr. Rajaratnam’s fund actually lost money on the trades outlined in the complaint against him.