NEW YORK, SEPT. 24 -- A federal judge today refused to drop former investment bankers Dennis B. Levine and Martin A. Siegel as defendants in a major lawsuit filed by investors in Ivan F. Boesky's defunct stock trading fund.

U.S. District Judge Milton Pollack ruled that Levine and Siegel, who have pleaded guilty to supplying Boesky with inside information about upcoming takeovers, played a significant role in the 1986 formation of Boesky's $1 billion arbitrage partnership.

Boesky pleaded guilty to criminal conspiracy charges last spring. Last November, the former stock speculator paid the Securities and Exchange Commission a record $100 million to settle civil insider trading charges.

In the spring of 1986, Boesky raised about $330 million from limited partners and $660 million from debt securities sold by Drexel Burnham Lambert Inc. to form his trading fund, which was to invest in the stocks of companies involved in takeovers.

After Boesky reached a secret plea bargain with the government in September 1986, but before his deal was disclosed to the public, he began to sell off his massive investment portfolio. By early 1987, his holdings were almost completed liquidated, and holders of the debt securities were paid off.

But not enough money was available to satisfy claims by the limited partners. Seeking to recover their investments plus damages, the partners have filed suit against Boesky, various companies he controlled, his attorneys and accountants, Drexel Burnham Lambert and individuals involved in Boesky's insider trading conspiracies, such as Levine and Siegel.

The partners allege that while raising money for the fund, Boesky and the others engaged in fraud by failing to disclose that Boesky's past success was based on illegal access to inside information about takeovers.

Attorneys for Levine and Siegel had argued that the former merger specialists had no legal obligation to warn investors about Boesky's fraudulent activities.

Pollack's decision today was the latest in a series of rulings by the judge in which he has refused to exonerate former Boesky associates from responsibility for that 1986 fund-raising effort.

"Levine and Siegel are charged with far more than merely possessing information and keeping silent," Pollack wrote in his opinion. "They are alleged to have been active and substantial conspirators and participants in Boesky's schemes to defraud and to violate the securities laws."

Attorneys for Levine and Siegel could not be reached today for comment.

Pollack earlier refused to drop Boesky's lawyers -- the New York firm of Fried, Frank, Harris, Shriver & Jacobson -- from the lawsuit, saying that the investors' allegation that a Fried, Frank partner had helped solicit funds for Boesky warranted further examination.

Discovery of documents and testimony in the lawsuit have been suspended by Pollack while he attempts to consolidate shareholder suits filed against Boesky.

Because the allegations in the lawsuits parallel investigations that are being conducted by the SEC and the Manhattan U.S. attorney's office, it is possible that discovery will be postponed indefinitely until those probes are completed.