By Nate Raymond

NEW YORK (Reuters) - Lawyers for a pair of traders who were found guilty as part of the government's wide-ranging crackdown on insider trading at hedge funds have urged a federal appeals court to reverse their convictions.

Attorneys for Zvi Goffer, a former securities trader who once worked at the hedge fund Galleon Group, and Michael Kimelman, co-founder of trading firm Incremental Capital, asked the 2nd U.S. Circuit Court of Appeals on Monday to vacate their clients' 2011 convictions.

Goffer's lawyer also argued that the 10-year sentence his client received from U.S. District Judge Richard Sullivan should be thrown out.

That sentence is disproportionate compared to the punishments meted out to other insider trading defendants such as Galleon founder Raj Rajaratnam, Alexander Dudelson argued to a three-judge panel of the 2nd Circuit.

The lower court also increased the sentence inappropriately because Goffer did not plead guilty, Dudelson said.

"It's the appellant's position he was punished for going to trial," he said.

Goffer is serving his sentence at a federal penitentiary in Lewisburg, Pennsylvania, according to the Federal Bureau of Prisons.

His sentence is the third-highest ever handed down in an insider trading case, according to his appeals brief. Dudelson has noted that his client received just one year less than Rajaratnam, even though the case against the Galleon founder, a onetime billionaire, involved an alleged gain of $50 million as well as charges of obstructing a U.S. Securities and Exchange Commission investigation.

Prosecutors said Goffer, a trader at Schottenfeld Group, was the ringleader of a scheme to trade on tips ahead of the public announcement of deals involving computer network equipment maker 3Com Corp, Canadian drug company Axcan Pharma Inc and other companies.

The other defendant, Kimelman, who worked with Goffer's brother, was convicted as part of the same scheme and sentenced to 2-1/2 years in prison.

Dudelson also contrasted the treatment of Goffer compared with Rajat Gupta, the former Goldman Sachs director convicted for leaking non-public information to Rajaratnam. Gupta received a two-year prison sentence in October.

Unlike Gupta, Dudelson said, Goffer had not breached anyone's trust.

Circuit Judge Richard Wesley noted that Goffer allegedly paid kickbacks to lawyers at the law firm Ropes & Gray for information on upcoming corporate acquisitions.

"He's 34 years old, the age of one of my children," Wesley said. "You'd think he'd know better."

Now 36, Goffer was 34 at the time he was sentenced.

Michael Sommer, a lawyer for Kimelman, argued that prosecutors had failed to present any evidence that his client knew he had received inside information before making trades in stock of 3Com in fall 2007.

"There are thousands of recordings, and on not one is there a tip," Sommer said.

Andrew Fish, an assistant U.S. attorney, said it was "undisputed" that Kimelman was a member of the conspiracy and that a juror, based on the evidence, could "infer he traded with knowledge at the time of the 3Com transaction."

The cases are United States v. Kimelman and United States v. Goffer, 2nd U.S. Circuit Court of Appeals, Nos. 11-4409 and 11-4193.

For USA: Andrew Fish, Manhattan U.S. Attorney's Office.

For Goffer: Alexander Dudelson, Law Offices of Alexander M. Dudelson.

For Kimelman: Michael Sommer, Wilson Sonsini Goodrich & Rosati.

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