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UPDATE 2-Brazil federal police raid JBS on insider trade probe, shares fall

(Recasts, adds comments by JBS, context)

SAO PAULO, June 9 (Reuters) - Brazil's federal police on Friday raided the offices of JBS SA to investigate the alleged use of insider information in financial market dealings, pushing shares in the embattled meatpacker to a two-week low.

Police said there were indications that JBS and controlling shareholder FB Participações SA gained an unfair advantage in trading stocks, currency futures and forwards in April and May.

"There is evidence these dealings occurred with the use of privileged information, generating undue advantages in capital markets in a context in which almost all investors incurred financial losses," the police said in an emailed statement.

JBS and its parent company J&F Investimentos have denied any wrongdoing.

The police operation follows several investigations by securities regulator CVM on trades made before the revelation of a plea deal by top JBS executives, which triggered a financial market selloff last month.

In the plea testimony, the Batista brothers, Joesley and Wesley, said President Michel Temer received 15 million reais in JBS bribes, exacerbating a scandal that threatens to oust him from government.

On Friday, police served three search warrants at the offices of JBS and FB in Sao Paulo, and also detained four unnamed people for questioning.

JBS and holding company J&F Participações said they surrendered all materials and documents requested by police during the raid, adding they are cooperating with the investigation. J&F reiterated in a Friday statement that all of the group's currency trades are legal and consistent with a strategy of hedging financial positions.

JBS stock on Friday fell as much 5.8 percent to 7.08 reais before recovering to a milder drop of 0.8 percent in late afternoon trading. The Bovespa index slipped 0.3 percent.

JBS' controlling shareholders sold shares in the meatpacker worth 329 million reais in April, according to securities filings. Police also questioned purchases of U.S. dollars in future and forward markets, which local media reported surpassed $1 billion.

JBS shares have fallen 16 percent since the Temer scandal broke on May 21, contributing to a 7.2 percent loss of the benchmark Bovespa stock index. The Brazilian real weakened 4 percent in the period as traders bet political turmoil could delay the implementation of structural reform.

($1 = 3.2706 reais) (Editing by Bernadette Baum and Diane Craft)