U.S. Bank taken legal action against by the government in 2012 for supposedly aiding a substantial scams at brokerage Peregrine Financial, must face claims for almost $36 million in restitution to Peregrine's victims, a government judge in Iowa ruled.

Court Linda Reade on Wednesday rejected the bank's argument that restitution should be sought from the person that committed the fraud, Peregrine founder Russell Wasendorf Sr., & not from the Bank.

US Bank, component of Minneapolis-based US Bancorp, was sued in 2013 by the U.S. Commodity Futures Trading Commission (CFTC) for apparently allowing Wasendorf treat an account set up for Peregrine client funds like his ‘Personal Piggy Bank.’

The lawsuit was the government's very first against a bank linked to the collapse of Peregrine and also a nearly two-decade-long fraud at the futures brokerage. Wasendorf began estimated a 50-year sentence in 2012 after begging guilty to embezzling greater than $215 million from hundreds of customers. The CFTC has estimated the bank's supposed misconduct triggered nearly $36 million in losses.

Teri Charest, a spokesperson for US Bank, said the bank did nothing incorrect and also would certainly defend itself vigorously.

‘We did not recognize about the Peregrine Ponzi plan and also in fact we were a sufferer of the very same scheme,’ she said. A spokesman for the CFTC decreased to comment. In her order, Reade also ruled that US Bank could not leave the CFTC's lawsuit based upon its argument that the compensation failed to identify the fraud.

In court filings, the bank had actually argued that the CFTC had ‘Unclean Hands’ in the situation due to the fact that it discovered warning signs during a 1999 audit and took no activity against Peregrine.

‘Although the 1999 CFTC audit should have led the CFTC to monitor Wasendorf's tasks much more very closely,' its failure to sense the scams needs to not prevent it from pursing an enforcement action, Reade said.

The order began motions by both sides for a judgment in their favor as an issue of law before the case goes to trial. The case is set for trial early following year.

While limiting U.S. Bank's defense, Reade ruled that other issues, such as whether the bank acted in bad belief, are best left to a jury.

The case is U.S. Asset Futures Trading Commission v US Bank, U.S. District Court, Northern District of Iowa, No 13-cv-2041.