City made a bid for Gago last week and the midfielder looked set to join the Premier League side.
But instead City boss Roberto Mancini tried to sign Parma ace McDonald Mariga, but he was refused a work permit.
Just hours before the transfer window closed on Monday, they tried to salvage a deal for Gago.
“City used us,” Gago’s agent Marcello Lombilla told radio station Onda Cero.
“This has never happened to me before.
“I don’t want to talk about the figures that City were offering because they approached Madrid without even knowing there wasn’t physically enough time to put something together.”
“Despite the fact he went from being ‘untransferable’ to suddenly ‘for sale’, he will always continue to work hard,” he added.
