By Grant McCool

NEW YORK (Reuters) - Convicted hedge fund tycoon Raj Rajaratnam is fighting to the last minute to convince the judge who will decide his fate next week to imprison him for less than the nearly 20 years or more demanded by prosecutors.

At a hearing on Tuesday in Manhattan federal court, Rajaratnam's lawyers disputed prosecutors' descriptions of the Galleon Group founder as a "serial" offender deserving of one of the longest sentences for Wall Street insider trading.

The main arguments revolved around sharp disagreement between the two sides over Rajaratnam's illicit profits, or gains he made by pulling his positions in stocks -- based on his illegal inside information -- that he knew would fall in value.

The issue is key to U.S. District Judge Richard Holwell's decision on October 13 of Rajaratnam's punishment under nonbinding federal sentencing guidelines, which take the "loss amount" into account. At Rajaratnam's two month-long trial that ended in May with a sweeping conviction on 14 criminal charges, the government put the figure at $63.8 million.

Defense lawyers have estimated the amount at about $36.3 million, but argued on Tuesday that the money manager should be judged on personal gains of as little as $7.4 million.

"We don't dispute that insider trading is a serious offense," Terence Lynam, a lawyer for Rajaratnam, told the judge. "But the sentencing range overstates the seriousness of the offense here."

Assistant U.S. Attorney Andrew Michaelson told Holwell that some monetary calculations in Rajaratnam's court briefs don't "pass the smell test."

Holwell said he would announce his ruling at the sentencing proceeding. He also said he would issue a written ruling before October 13 on a separate issue argued on Tuesday over whether or not Rajaratnam obstructed justice in a 2007 deposition to the U.S. Securities and Exchange Commission.

U.S. prosecutors have asked Holwell to imprison Rajaratnam, 54, for between 19-1/2 years and 24-1/2 years, reflecting federal sentencing guidelines. He was convicted on evidence based largely on FBI phone taps in a broad probe that ensnared dozens of traders, lawyers and executives.

Defense lawyers suggest a much lower sentence of between 6-1/2 years and 8 years under the guidelines, or even less.

They have also requested that Rajaratnam be allowed to remain free on $100 million bail and under house arrest while he appeals his conviction. They cited unspecified health reasons and his strict adherence to bail conditions since his October 2009 arrest as reasons why he should not report to prison until the appeal process is completed.

The case is USA v Raj Rajaratnam et al, U.S. District Court for the Southern District of New York, No. 09-01184.

(Reporting by Grant McCool, editing by Gerald E. McCormick)