A former stock trader yesterday detailed a pipeline of confidential law enforcement information that ran from investigators’ files on publicly traded companies to the Internet chat rooms of Anthony Elgindy, a noted San Diego stock analyst.

Testifying in federal court in Brooklyn, Derrick Cleveland told jurors that, starting in 2000, he and an FBI agent began passing Elgindy confidential information about criminal and regulatory investigations into penny stock companies.

Cleveland said that Elgindy used the negative information to sell short – or bet that the companies’ stock prices would drop. He testified that Elgindy then publicized news of the secret criminal troubles through his Web sites, including his investor subscription serviceAnthonyPacific.com, in order to drive the companies’ stock prices “into a spiral.”

Elgindy and the former agent, Jeffrey Royer, are on trial for racketeer ing, securities fraud, and other crimes in an alleged scheme to manipulate the stock market.

Prosecutors also accuse Elgindy of using the negative, confidential information to extort the companies.

Elgindy and Mr. Royer deny the charges. Defense lawyers say Cleveland is lying to avoid prison.

The 38-year-old Oklahoma resident has a prior conviction for drug dealing and is testifying for prosecutors as part of an agreement in which he pleaded guilty to securities fraud and extortion.

Cleveland yesterday described the origins of the alleged scheme. He said he met Mr. Royer in early 2000 when the agent came to his office to discuss an investigation. The two men struck up a conversation about stock trading. Soon Cleveland was describing the agent as “Jeff, my FBI friend.”

Cleveland said Mr. Royer tipped him off one day to an investigation into a small technology company. Cleveland said that Mr. Royer was upset because he had been ordered by superiors to sell his investment in the company.

“He told me there thousands of companies out there like that,” Cleveland testified.

Mr. Royer, Cleveland testified, began giving him more information to identify other troubled companies – ones that would offer the men “good plays” for investments.

“I told him I would do a fifty-fifty split with him,” he said.

Cleveland said the two men decided to share the information with Elgindy because Elgindy, through his short-selling Web sites and client base, had the “power” to “destroy stocks.” Cleveland said he told Elgindy that he “was taking care” of Mr. Royer.

Cleveland described picking companies that Mr. Royer would then check for criminal or regulatory investigations. He said Mr. Royer’s searches produced information about criminal histories of people connected to companies and Mafia connections to Wall Street.