U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20583 / May 19, 2008
Securities and Exchange Commission v. Watermark Financial Services Group, Inc., et al., Civil Action No. 08 CV 00361 (WMS) (W.D.N.Y.)
Temporary Restraining Order Entered in $5.7 Million Dollar Offering Fraud and Ponzi Scheme in Western New York
On May 16, 2008, the Honorable William M. Skretny, United States District Judge for the Western District of New York, entered an order temporarily restraining 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 from violating the antifraud provisions of the federal securities laws. The court also restrained defendants Watermark Financial, Watermark Holdings, M-One, Gane, and Altadonna from violating the securities registration provisions, and Gane from violating the broker-dealer registration provisions. In addition, the court's order also froze the assets of the defendants and relief defendants Denkon, Inc., a Florida company, and two of Gane's children, Guy W. Gane, III and Jenna Gane.
The Commission's complaint, filed in federal court in Buffalo, New York, alleges that 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 court's order temporarily restrained Watermark Financial, Watermark Holdings, M-One, Watermark Capital, Gane, and Altadonna from violating Section 17(a) of the Securities Act of 1933 ("Securities Act"), and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5; Watermark Financial, Watermark Holdings, M-One, Gane, and Altadonna from violating Sections 5(a) and 5(c) of the Securities Act; and Gane from violating Section 15(a) of the Exchange Act. The court also enjoined and restrained the defendants and relief defendants from destroying, altering, or concealing documents.
For further information, see Litigation Release No. 20576 (May 15, 2008)