FEDERAL prosecutors in some headline-grabbing cases are reeling from a series of reversals - and in some instances put-downs - by the US court of appeals in New York. The cases highlight the double-edged nature of prosecutorial zeal and the danger that upholders of justice can, if they aren't careful, become instruments of injustice.Several of the setbacks have come in cases that arose out of the fraud and insider-trading investigations of Ivan Boesky and other Wall Street speculators. Boesky and others with whom he dealt, including junk-bond tycoon Michael Milken, pleaded guilty to various securities-law violations. But when the feds took Wall Street defendants to trial, the prosecutors haven't fared so well. Earlier this month the appellate court dismissed the stock-manipulation conviction of trader John A. Mulheren Jr.; the court's rebuking opinion said the prosecutors' central assertion "defies reason and a sense of fair play." The same court recently reversed convictions of GAF Coporation and one of its executives, and of principals of Princeton/Newport, an investment firm. Then there's the case of Robert Wallach, a lawyer friend of former Attorney General Edwin Meese, who was prosecuted in the Wedtech government-procurement scandal. To many observers the case looked flimsy from the start, and Wallach's conviction was ultimately obtained with what turned out to be perjured testimony by the government's key witness (a crooked Wedtech officer cooperating with the prosecutors under a plea bargain). In reversing last month, the court of appeals hinted that the prosecutors may e ven have known that their witness lied. We pay prosecutors to go after the "bad guys" aggressively, and their impact goes beyond the outcome of specific cases. No one can doubt that a lot of shady dealing was going on during Wall Street's go-go '80s, and that the prosecutions of Boesky, Milken, and others deterred further abuses. Prosecutors can't always wait to bring charges until they have an ironclad case, especially in complex financial transactions. But prosecutors' uprightness can turn into blinding self-righteousness, and zeal into corners-cutting obsession. Once falsely accused people have been dragged through the criminal-justice system, they often don't recover their reputations and almost never their legal costs. Prosecutors wield enormous and highly discretionary power. They can ruin innocent lives. Their sense of responsibility must be commensurate to their power.