They incurred an automatic 10-point penalty as a result and are now facing a relegation scrap rather than competing for promotion.
Warnock is frustrated by what has happened, particularly as it only gave him a few days to make changes to his squad before the transfer deadline.
"To lose 10 points for the sake of that I find disgusting personally because I know what Simon has been through," Warnock told Sky Sports News.
"For the last 12 or 18 months he has tried like hell to get rid of it.
"The timing I can't accept, five or six days before the transfer window ended, I can't understand it."
Palace's administrators were forced to sell star striker Victor Moses to Wigan to help the club, while they also wanted to accept an offer from Wolves for Nathaniel Clyne.
The defender opted to stay at Selhurst Park and Warnock believes he made the right decision.
He added: "Nathaniel Clyne was more or less asked to go to Wolves but it wasn't the right career move for him. He wants to play football."
Scunthorpe 6/4, Crystal Palace 7/4, Draw 12/5