Minneapolis-based U.S. Bank has been ordered to pay US$ 18 million to the customers of failed futures firm Peregrine Financial Group, Inc. after its accounts were used in the firm’s fraud against clients.

The U.S. Commodity Futures Trading Commission (CFTC) announced today that chief judge Linda Reade of the U.S. District Court for the Northern District of Iowa entered an order today imposing a permanent injunction against U.S. Bank National Association, and ordering the bank to pay US$ 18 million, which is to be returned to former clients of Peregrine Financial.

Back in 2012, Peregrine’s owner, Russell Wasendorf, Sr. was criminally charged and pled guilty in connection with the fraud that led to the firm’s failure; and, in early 2013, he was sentenced to 50 years in prison and ordered to pay more than US$ 215 million in restitution.

According to the CFTC, the bank served as a depository for Peregrine and held a customer segregated funds account that Wasendorf used to defraud more than 24,000 Peregrine clients. It reports that between June 2008 and July 2012, Wasendorf withdrew and transferred approximately US$ 36 million from the segregated account to people and entities that were not Peregrine customers.

The CFTC charged the bank with improperly treating the segregated account like a regular business chequing account, and allowing Wasendorf to withdraw customer money for non-customer purposes.

“Russell Wasendorf stole enormous sums of money that Peregrine’s customers entrusted to him. He is responsible for his crimes. However, that fact does not excuse U.S. Bank’s failure to meet its own responsibilities to safeguard Peregrine’s customer funds that it held,” said CFTC director of enforcement, Aitan Goelman.

The regulator reports that the bank has since implemented new policies and procedures specifically applicable to these sorts of segregated accounts. The judge’s order enjoins U.S. Bank from committing future violations and requires it to pay US$ 18 million to the court-appointed trustee for Peregrine.