SAO PAULO (Reuters) - Brazil’s federal police on Wednesday arrested the chief executive of JBS SA, the world’s No. 1 meatpacker, accusing him of insider trading ahead of a plea bargain he signed this year whose disclosure pummeled the company’s stock.

Wesley Batista (R), chief executive of JBS S.A., the world's largest beef producer, leaves the Federal Police headquarters to give a testimony in the Federal Court in Sao Paulo, Brazil September 13, 2017. REUTERS/Leonardo Benassatto

Wesley Batista, who has been at the helm of JBS since 2011, was detained under an arrest warrant against him and his younger brother, Joesley, for suspected insider trading. The billionaires, both in their mid-40s, control 42 percent of JBS.

The Batista brothers’ lawyer, Pierpaolo Bottini, called the insider trading allegations and the arrest of the meatpaker’s CEO “unjust, absurd and regrettable.” If convicted, the Batistas may be the first people in Brazil jailed for insider trading.

JBS JBSS3.SA shares rose 2.4 percent, erasing early losses, on optimism that Wesley Batista's arrest will accelerate his ouster as chief executive.

The accusations could hurt a plea deal that both brothers signed in May in relation to a three-year graft probe that has shocked Brazil’s political and business establishment.

The insider trading case involving JBS follows probes by markets watchdog CVM on trades that took place before the plea deal was leaked to the press on May 17. The impact from the leak, which ensnared senior politicians, led to Brazil’s worst financial market selloff in at least a decade.

According to police investigators, the Batistas were aware of the market impact that their plea deal would have on JBS shares and the currency. Police said the brothers created a strategy to protect their JBS holding and help the company amass large foreign-currency positions ahead of the leak.

On May 18, the stock shed 9.7 percent, while the Brazilian real tumbled 8.2 percent - its biggest daily decline since January 1999.

“A day ahead of the leaks, JBS rose to the No. 2 spot in currency purchases, an unheard of fact,” police investigator Rodrigo de Campos Costa said in a news conference.

SUPER WEDNESDAY

The arrest was the marquee development on a day dubbed “Super Wednesday” by local media because of developments in the dizzying array of graft scandals that have implicated top politicians.

The Supreme Court ruled that Prosecutor General Rodrigo Janot should continue to handle a corruption case against President Michel Temer, while ex-President Luiz Inacio Lula da Silva was questioned by federal judge Sergio Moro, Brazil’s leading anti-corruption crusader.

Topping things off, another household name in Brazilian politics, former Rio de Janeiro state governor Anthony Garotinho, was arrested in a separate corruption probe in the midst of hosting a radio show.

The detention of Wesley Batista comes as his plea deal with prosecutors is unraveling due to alleged omissions in the brothers’ testimony. Some minority shareholders were already seeking to remove him.

“It is not every day that a CEO getting arrested for insider trading can be viewed as a credit positive, but we see the latest events as weakening Batista’s push to remain as CEO,” analysts at CreditSights Inc wrote in a note to clients.

Certain units of JBS on Wednesday suspended cattle purchases temporarily following Batista’s arrest, a source familiar with the matter said, adding that it was unclear how long the suspension would stay in place.

The yield on the company's 7.75 percent bond due in October 2020 AT092888843= rose about 0.17 percentage point to 7.966 percent on Wednesday.

Joesley Batista has been under arrest since Sunday after recordings suggested he tried to take advantage of prosecutors and conceal details during negotiations that led to the plea deal. He has denied any wrongdoing.

In their testimony, the brothers accused Temer of working to obstruct a corruption probe, which Temer has repeatedly denied. The family’s investment holding company, J&F Investimentos SA, paid a record fine of 10.3 billion reais ($3.3 billion) as part of the plea bargain deal.

Since that agreement was signed on May 31, Temer and the Batistas have traded barbs - taking their rift to corporate boardrooms. State development bank BNDES, whose investment arm owns 21 percent of JBS, is seeking to oust the Batistas from the company’s management and board.

In a statement, BNDES said the company should pick a new chief executive officer in the next shareholders meeting. A person familiar with the matter said JBS’s board did not discuss succession plans for Batista at a Tuesday meeting.