CAIRO Aug 7 (Reuters) - Egypt's general prosecutor said on Sunday that local wheat suppliers worked with government employees to falsely claim 621 million Egyptian pounds ($69.93 million) worth of grain that does not exist.

Egypt has been embroiled in a controversy over its local wheat supplies, with grains industry officials claiming that over 2 million tonnes of the 5 million tonnes of locally procured wheat in this harvest may exist only on paper.

Egypt's general prosecutor has ordered travel bans, frozen funds and arrested several private silo owners suspected of claiming higher quantities of wheat than they are actually storing.

Egypt pays its farmers a high price for their wheat in an attempt to encourage them to grow the crop. This has for years encouraged local traders -- who act as middlemen, buying wheat from scores of small-landholders -- to mix cheaper imported wheat into the subsidised local supplies.

The general prosecutor said on Sunday an ongoing investigation showed cooperation between government employees and silo owners looking to falsify documents that would allow them to receive government payments for wheat.

"Ongoing investigations ... indicate some of those in agriculture (ministry) administration worked with some silo and storage area owners to manipulate the local wheat procurement process in order to obtain 533 million pounds," a statement from the general prosecutor said.

Suppliers delivered 221,800 tonnes of wheat based on false documents worth a total of 621 million pounds and have received 533 million pounds for deliveries to date, the statement said.