Regulators in charge of monitoring the bankrupt futures brokerage Peregrine Financial Group missed warning signs as far back as 1994, according to an independent report released on the same day Peregrine's founder was sentenced to 50 years in prison.
(Read More: Peregrine Financial's Wasendorf Sentenced to 50 Years .)
The National Futures Association, an industry organization that was PFG's primary regulator, commissioned the report soon after the firm collapsed in July.
PFG founder and CEO Russell Wasendorf Sr. admitted stealing some $215 million in customer funds by falsifying the firm's bank statements and lying to the NFA and the Commodity Futures Trading Commission. (Read More: PFG Founder Admits: I Forged Bank Statements for 20 Years .)
But the report, authored by former SEC Inspector General David Kotz, found regulators at both agencies missed multiple opportunities to catch the fraud.
The earliest one apparently came in 1994 when, according to the report, a CFTC employee personally visited a branch of U.S. Bank-where PFG's customer funds were held-asking for a signed confirmation of the firm's accounts. The bank declined to provide the confirmation, but the CFTC did not follow up, according to the report.
Wasendorf, 64, confessed to creating fake bank statements with inflated balances and submitting them to the NFA for years. But in 2011, more than a year before the fraud was exposed, the NFA received an actual bank statement from U.S. Bank showing a balance of just $7 million-a $211 million discrepancy from the balance Wasendorf had reported.
When the NFA asked about the shortfall, the report says Wasendorf explained it away as a mistake. A "corrected" statement soon followed, and the fraud continued. (Read More: Wall Street Jailbirds .)
The report, which includes nearly two dozen recommendations for reforms, faults the NFA for inexperienced staffers who were easily intimidated by Wasendorf and his director of compliance, Susan O'Mara, who has not been accused of wrongdoing.
The report says NFA employees missed other warning signs, including the fact that PFG's audit firm was a one-person operation based in suburban Chicago. The NFA also failed to question some $60 million in capital contribution from Wasendorf himself, which the report says should have been a sign of potential shortfalls. (Read More: The Best Places to Go to Prison .)
The report also notes that while both the NFA and CFTC monitored the firm, the agencies did not communicate with one another.
There was no immediate comment from either agency.
-By CNBC's Scott Cohn; Follow him on Twitter: @ScottCohnCNBC
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