UPDATE 2-Brazil prosecutors charge JBS board chairman, shares fall

(Adds updated comment from J&F)

SAO PAULO, Jan 26 (Reuters) - Prosecutors charged Joesley Batista, the chairman of Brazilian meatpacker JBS’s board and president of its controlling shareholder J&F Investimentos, and eight others with crimes against the financial system, sending shares of JBS SA down more than 8 percent on Tuesday.

The statement from prosecutors said J&F Investimentos and another subsidiary in Grupo JBS, Flora Produtos de Higiene e Limpeza, obtained an 80 million reais ($19.7 million) loan from Banco Rural in 2011 and passed it on to the group’s bank, Banco Original.

Banco Original then loaned the funds back to Banco Rural’s holding group Trapezio S.A.

Triangular operations in which two financial institutions from different economic groups issue credit to companies that also are part of these conglomerates violate loan laws in Brazil, the prosecutors said.

In a statement, J&F said neither the meatpacker JBS nor any of its executives were named in the lawsuit. J&F said those charged were confident they would prove their innocence.

Banco Rural was liquidated in 2013 due to its poor financial situation and senior managers were found guilty of fraud and money-laundering in a vote-buying scandal.

Local bank Bradesco BBI called the charges “a negative newsflow” in a commentary to clients but noted that meatpacker JBS is not involved and said 80 million reais is very small in terms of the size of the group.

Brazil’s federal accounts court, the TCU, said in November it had identified irregularities on loans to JBS and is deepening an investigation into the company’s relationship with state-run lender BNDES.

$1 = 4.05 reais (Reporting by Caroline Stauffer; Additional reporting by Paula Laier; Editing by Bill Trott, Bernard Orr)