In a statement late on Friday, CVM said it is investigating “signs of possible insider trading” of foreign exchange futures, derivatives and JBS stock ordered by meatpacker JBS SA, Banco Original SA and FB Participacoes SA.

A first investigation had been launched on Thursday, the regulator said.

The Batista brothers, Joesley and Wesley, controlling shareholders in JBS, claim President Michel Temer received 15 million reais (C$6.2 million) in bribes from the world’s largest meat processor, according to plea-bargain testimony. Temer has denied any wrongdoing and on Thursday refused to resign.

The real fell eight per cent against the U.S. currency on Thursday, sustaining the largest losses since the country devalued its currency in 1999. The real pared losses on Friday, gaining three per cent against the dollar.

Valor Economico reported on Friday that companies owned by the Batista brothers bought over US$1 billion in U.S. dollar contracts in the local market hours before the plea deal news broke.

JBS said in a statement on Friday any trades made this week were consistent with the company’s strategy of hedging its large dollar-denominated debt. The company said the recent currency swings could have caused more than one billion reais in losses.

The regulator is also examining the sale of shares in the company by its controlling shareholders and subsequent acquisitions by the company´s treasury.

Reuters reported on Thursday the controlling shareholders had sold 329 million reais (C$136 million) worth of JBS shares in April, after the secret plea deal talks had gotten underway.

During the same period, JBS’s treasury, which had not owned shares during the previous year, acquired around 200 million reais in stocks.

— Reporting for Reuters by Tatiana Bautzer and Alberto Alerigi Jr.; writing by Ana Mano and Silvio Cascione.

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Import restrictions by several key importers of Brazilian meat, ranging from China to Europe, caused a 22 per cent drop in exports of pork and poultry since news of the federal police probe broke on March 17, the Brazilian Animal Protein Association said.

The group did not provide beef export figures. But Brazil’s overall meat exports generate nearly US$14 billion annually and any drop in foreign shipments could stir new headwinds for the country’s recession-hit economy.

Police have accused more than 100 people, mostly inspectors, of taking bribes for allowing the sale of rancid products, falsifying export documents or failing to inspect meatpacking plants at all.

Prosecutors have yet to present charges and the police allegations have not been proven.

Meat industry officials have sought to downplay the impact of the probe, known as “Operation Weak Flesh,” saying 33 arrests made so far pointed to only isolated cases of wrongdoing.

But Planning Minister Dyogo Oliveira was less sanguine in comments to journalists in Sao Paulo on Friday.

“It will clearly have some (economic) impact, but we still do not have a clear idea of the dimensions,” Oliveira said.

BRF SA, the world’s biggest poultry exporter, and JBS, the No. 1 beef producer, are among dozens of firms that have been targeted in the police probe. Both companies have denied wrongdoing and assured consumers that their products meet rigorous quality standards.

Fallout from the investigation grew on Friday as officials in Hong Kong called on supermarkets to stop selling meat from 21 Brazilian plants targeted by police.

China also agreed to lift restrictions on Australian beef imports, adding to competition for Brazil in one of the world’s fastest growing markets.

Vytenis Andriukaitis, the European Union’s health and food safety commissioner, said a visit to Brazil next week would include a meeting with Agriculture Minister Blairo Maggi to discuss sanitary measures among other topics.

Diplomats told Reuters on Thursday that the EU had asked Brazil to voluntarily suspend all shipments of meat to its member countries to avoid a more cumbersome formal ban.

The probe into Brazil’s meat industry is a setback for its powerhouse farm sector, which has been a rare bright spot amid the country’s worst economic recession on record.

Brazil, Latin America’s biggest economy, is one of the world’s leading exporters of staples from coffee and orange juice to sugar and soybeans.

— Reporting for Reuters by Alberto Alerigi and Thais Freitas; additional reporting by Tatiana Bautzer in Sao Paulo, Pedro Fonseca in Rio de Janeiro; writing by Brad Haynes.

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