U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 20576 / May 15, 2008

Securities and Exchange Commission v. Watermark Financial Services Group, Inc., et al., Civil Action No. 08 CV 0361 (W.D.N.Y.)

SEC Brings Emergency Action Against Guy W. Gane, Jr., Lorenzo Altadonna and Certain Affiliated Entities to Halt Ongoing Fraud

The Securities and Exchange Commission announced today that it filed an emergency civil enforcement action to halt an ongoing offering fraud and Ponzi scheme by defendants Watermark Financial Services Group, Inc. ("Watermark Financial"), Watermark M-One Holdings, Inc. ("Watermark Holdings"), M-One Financial Services, LLC ("M-One"), Watermark Capital Group, LLC ("Watermark Capital"), Guy W. Gane, Jr., and Lorenzo Altadonna. The Commission's complaint also names as relief defendants Denkon, Inc. and two of Gane's children, Guy W. Gane, III, and Jenna Gane.

According to the Commission's complaint, from at least May 2005 to the present, Gane and M-One orchestrated a securities offering fraud that has raised at least $5.7 million from approximately 90 investors, including a number of senior citizens, through the sale of debentures and promissory notes issued by the various entity defendants. Gane is a principal of each of the issuing entities. The complaint further alleges that the defendants told investors that their money would be used to purchase or develop real estate, but instead Gane: (i) used new investor funds to pay back earlier investors; (ii) misappropriated investors' funds by using them to pay himself, his family and others; and (iii) transferred substantial portions of investor funds to Denkon, Inc., Guy W. Gane, III, and Jenna Gane for no apparent consideration. In addition, the complaint alleges that the debentures offering was not registered with the Commission and that Gane violated the broker-dealer registration provisions of the federal securities laws.

The complaint alleges that (i) all defendants violated Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5; (ii) Gane, Altadonna, Watermark Financial, Watermark Holdings, and M-One violated Sections 5(a) and 5(c) of the Securities Act; and (iii) Gane violated Section 15(a) of the Exchange Act.

The Commission seeks, among other emergency relief, a temporary restraining order (i) enjoining the defendants from future violations of the federal securities laws; (ii) freezing the defendants' and relief defendants' assets; (iii) directing each of the defendants and relief defendants to provide verified accountings; and (iv) prohibiting the destruction, concealment or alteration of documents. In addition to this emergency relief, the Commission also seeks preliminary and permanent injunctive relief and civil money penalties against the defendants as well as disgorgement by the defendants and relief defendants of their ill-gotten gains plus prejudgment interest.

The Commission's investigation is continuing. The Commission acknowledges the assistance of the United States Attorney's Office for the Western District of New York and the United States Postal Inspection Service in this matter.

SEC Complaint in this matter