(Adds details, NEW YORK to dateline, byline)
* Level Global co-founder Chiasson to surrender
* Former Diamondback trader Newman arrested
* Hedge fund firms raided in 2010
* More than 50 people accused in overlapping probes
By Basil Katz
NEW YORK, Jan 18 (Reuters) - At least two senior hedge fund employees were being arrested as part of the government's sweeping probe into insider trading, people familiar with the matter said on Wednesday.
The arrests reflect a widening of the government's long-running probe into the alleged sharing of confidential information on publicly traded corporations with hedge fund managers and analysts. In the biggest case so far, onetime billionaire Raj Rajaratnam was convicted of insider trading and is now serving an 11-year prison term.
Anthony Chiasson, who co-founded the Level Global Investors hedge fund, is among those expected to face charges, and is turning himself in to authorities, one of the people said.
Todd Newman, who headed technology trading for Diamondback Capital Management from Boston, has also been arrested, another person said.
Newman had been placed on leave of absence in 2010 and subsequently was let go by that firm. Reuters in November reported the government's interest in Newman.
Overall, charges against at least four people are expected to be unveiled on Wednesday, the people said. The charges are expected to be filed in U.S. District Court in Manhattan.
Jon Horvath, who is currently employed at Sigma Capital Management, a unit of Steven A. Cohen's $14 billion hedge fund SAC Capital, was also arrested, one of the people said. A spokesman for SAC Capital could not immediately be reached for a comment. The identity of the fourth person could not immediately be confirmed.
The people declined to be named because of a lack of authority to speak about the arrests. Lawyers for Chiasson, Newman and Horvath did not immediately respond to requests for a comment or could not immediately be reached.
More than 50 people have been arrested or charged in overlapping federal insider trading probes that were first unveiled in October 2009. Most of these people have pleaded guilty or been convicted.
Many of the cases have been based at least in part on the use of government wiretaps authorized by federal judges.
Four hedge fund firms -- Level Global, Diamondback, Loch Capital Management and Barai Capital Management -- were raided by the FBI in late 2010 as part of the insider-trading probe. Level Global, Loch and Barai have since folded.
Rajaratnam, founder of the Galleon Group, remains the best-known investor implicated in the probe. A jury convicted him of fraud and conspiracy charges last May.
Rajat Gupta, a former chief of the consulting firm McKinsey & Co and director of both Goldman Sachs Group Inc and Procter & Gamble Co, has been charged with providing illegal tips to Rajaratnam. He is fighting those charges. (Additional reporting by Matthew Goldstein and Jonathan Stempel in New York, and Svea Herbst-Bayliss in Boston; Editing by Martha Graybow and Maureen Bavdek)