A further five-point penalty, though, that was suspended until the end of next season has been removed, the Rugby Football Union announced.
The independent appeal panel's decision means London Welsh are five points adrift at the Premiership basement of 11th-placed Sale Sharks with just four league games left.
The punishment was handed out for fielding an ineligible player - scrum-half Tyson Keats - in 10 Premiership games this season.
Mike Scott, the former London Welsh team manager, has been banned for life from rugby after he admitted supplying false information regarding Keats, including a forged passport, to the RFU.
Keats was eligible for an ancestry visa, due to his grandfather being born in England, but Scott made a mistake in the original application.
Instead of re-applying, Scott told Keats' agent and the club that the visa had been successfully granted to the player.
Meanwhile, Scott submitted false documents to the RFU in a bid to pass Keats off as English-qualified. Scott accepted a police caution on February 14 for his actions in falsifying registration documents.
London Welsh, though, argued they should not be blamed for fraudulent behaviour conducted by Scott, who was described in the original judgement as a "rogue employee".
The club said in a statement it had been punished for the "completely unnecessary fraudulent actions of one individual".
"We are particularly disappointed for the players, who've given everything they can for the club, and ultimately it is they who have been punished for something completely beyond their control," London Welsh chief executive Tony Copsey said.
"However, there are still four games remaining in the season and the focus and efforts of the players, the coaching staff and everyone at London Welsh is now on those remaining matches."
The club, who won a court battle to join the Premiership this season, are bottom of the table, five points behind Sale Sharks.
London Welsh welcomed the removal of the suspended five-point penalty and said this had justified their decision to appeal.
Gareth Rees, chairman of the panel, said in a statement issued by the Rugby Football Union (RFU) that the Independent Appeal Panel had accepted that the circumstances of the case were exceptional.
"However, we have to mark this serious breach with a points deduction and, although we have allowed the appeal in respect of the five points which were suspended, we must acknowledge the impact on the integrity of the game and deduct five Premiership points with immediate effect," he said