NEW YORK, AUG. 4 -- The first insider stock trading case to reach trial since the current Wall Street corruption scandal began 14 months ago opened here today in a packed federal courtroom.

The onlookers -- who included several federal prosecutors involved in continuing grand jury probes of major Wall Street investment houses -- came for a close-up look at the unfolding scandal. But a defense attorney downplayed the case's significance, telling the jury his client "has as much to do with Wall Street as the man on the moon."

The defendant, Israel G. Grossman, 34, a former associate at the prestigious corporate law firm of Kramer, Levin, Nessen & Kamin, is accused of illegally passing inside information stolen from his firm to friends and relatives.

The friends and relatives allegedly used the information, which concerned a major recapitalization plan at Colt Industries Inc., to earn more than $1.4 million by purchasing Colt stock options before the plan was disclosed to the public. A federal prosecutor said today that a portion of those profits was earmarked for Grossman.

(News of the recapitalization plan caused the price of Colt shares to rise from about $65 to $93 in one day of trading.)

The Grossman case, while involving relatively small sums of money, has taken on added significance because it is the first criminal insider trading case to reach trial since the arrest of former investment banker Dennis B. Levine in May 1986. Levine's decision to cooperate with federal investigators set off a chain of guilty pleas by Wall Street lawyers and financiers, including former stock speculator Ivan F. Boesky and brokerage executive Boyd L. Jefferies.

While the Grossman trial did not result from the ongoing grand jury investigations of Wall Street corruption stemming from cooperation by Levine, Boesky, Jefferies and others, the case is described by some as an important test of the government's ability and momentum.

Manhattan U.S. Attorney Rudolph W. Giuliani has tapped Howard Wilson, the chief of his criminal division, to try the case against Grossman.

Despite the well-publicized guilty pleas they obtained during the past year, federal prosecutors have faced perceived setbacks in recent months. In May, Giuliani withdrew insider trading charges against three leading Wall Street executives because more time was required to complete a grand jury investigation of alleged wrongdoing by the men.

Giuliani has said that he expects to bring new broadened indictments against the men after the end of summer.

The Grossman case, which is expected to last about two weeks, is relatively straightforward.

Wilson said in his opening statement today that the government would use extensive telephone, brokerage and stock exchange records to establish an essentially circumstantial case against Grossman. Computerized phone records kept by the Kramer Levin law firm, for example, show a detailed pattern of calls from a phone at Grossman's office to relatives, friends and stock brokerages at the same time Colt options were purchased, according to Wilson.

"There simply is no other way to explain what happened" except that the calls were part of an insider trading scheme, Wilson told the jury.

The prosecutor also disclosed that the government will call one witness, David Lev, distantly related to Grossman by marriage, who will testify that he was an accomplice in Grossman's alleged scheme to profit in Colt options. Wilson conceded that Lev has been convicted of perjury once, and that he lied to the Securities and Exchange Commission during a probe of suspicious trading in Colt options.

Grossman's attorney, Irving Seidman, chose in his opening statement not to refute many of the specific allegations made by the government. Instead, he told the jury the government's proof was inadequate. "This is not an issue of morality. This is an issue of legality," Seidman said. "The government has failed to prove guilt beyond a reasonable doubt."

The defense lawyer emphasized that since no tape recordings were made of the phone calls from Grossman to his friends and relatives, the government could not prove what was discussed during the conversations.

Wilson said that phone records covering four months of calls from Grossman's office showed the lawyer only called two relatives accused of trading in Colt options on days when they made options purchases.

Grossman's relatives and friends have been named in a related SEC civil lawsuit but have not been charged criminally.