A. Criminal Trial and Seized Property: Ray Levy successfully postponed his sentencing hearing from June 29th until November 30th. Many of you expressed disappointment that he had been permitted to plea bargain by admitting two counts of conspiring to commit mail fraud and conspiring to commit money laundering, which carried a maximum 10 year sentence.

The courtroom was packed on November 30th with more than 80 victims. The probation officer had submitted a presentence investigative report, which recommended more than a 10 year sentence, because the probation officer determined that Mr. Levy was one of the principals in the fraud and had preyed upon elderly people. Mr. Levy's lawyer objected to those conclusions and the prosecutors reluctantly advised Judge Hurley that the terms of the plea agreement precluded the government from introducing evidence on those points. Fortunately, about eight or nine victims volunteered to testify and they told Judge Hurley how they had been swindled. Several of them had direct communications with Mr. Levy. Approximately 40 investors had also submitted notarized victim statements, which I tried to introduce into evidence.

U.S. District Court Judge Daniel T.K. Hurley sentenced Ray Levy to 14 years, after determining Levy was a principal in the fraud scheme and had targeted elderly investors. Mr. Levy will also forfeit his interest in four vehicles, which had been seized, and he was ordered to pay $117 million in restitution. Following the sentencing Mr. Levy was taken into custody and started serving his sentence. I sincerely appreciate the victims who helped us add more years onto his sentence.

The other defendants who pled guilty before trial have been sentenced: Harvey Brandau (15 months incarceration, 3 years supervised release); Ivan Burgos (37 months incarceration, 3 years of supervised release); Cheryl Poindexter (12 months incarceration, 3 years supervised release); and Jeffrey Paine (60 months incarceration, 3 years of supervised release).

Gary Pierce, Gar Hogan, Zane Balsam, Wanda Tirado, Alan Lewis and Juan Arroyo were convicted by a jury on July 10th and are currently scheduled to be sentenced the week of December 26th. Most of these people face very heavy sentences.

The U.S. Marshal's Office ("USMO") sold a helicopter, seven vehicles, two small boats, and collected checks representing the proceeds of two more cars for a total of approximately $1,078,000. This is in addition to the personal property the USMO sold prior to my first distribution. As Restitution Receiver, I sold 14 seized properties, which had been titled in the name of CSI, for a gross amount of $5,233,488.08. This is 27% above the USMO's appraised values and I am quite pleased with the results. After paying expenses and reserving for other costs, I have $5,898,365.17 available for distribution to the victims as criminal restitution at this time.

I sold five other parcels of seized real estate, and will be in a position to distribute those proceeds after the remaining criminal defendants are sentenced. In addition, I have six homes and three vacant seized lots listed for sale. The most expensive of these remaining properties is the mansion in Stowe, Vermont, where Fred Brandau installed an automatic car wash in the six-car garage he built. I have the house under contract for $1.625 million, but have had to pay substantial amounts in real estate taxes and will be paying approximately $105,000 to a contractor who was not paid in full when the property was seized. I already sold Zane Balsam's house for $2.1 million and netted $1.931 million. I hope the remaining seized real estate will be sold by the Summer and if so, I will have more than $6 million to distribute then. This is definitely an estimate and could be lower or higher depending upon the real estate market and may take longer to realize some of the estimated values.

B. Claims Objection Process: I objected to more than half of the proofs of claim filed because it was necessary to be consistent and only allow claims for the net amount invested and not treat anyone as having an ownership or security interest in a particular policy. A group of investors who got involved near the end called themselves the ABS Trust investors and tried to claim a preferred status in the bankruptcy, as did a large investor, Howard Urban. Ronald Srein, who was not a FinFed investor, also claimed an interest in some of the viatical policies. I am pleased to report that all claim objections have been successfully concluded, other than the Urban and Srein claims and a handful of ABS creditors represented by J.C. DeBoard & Co (the "DeBoard Group"). The bankruptcy court sustained our objection to the claims of preferred status asserted by Mr. Urban and by the DeBoard Group, but Mr. Urban and the DeBoard Group have each appealed these rulings; these appeals are still pending. The Bankruptcy Court has not yet ruled on Mr. Srein's claim of ownership interest in some of the viatical policies.

The ABS Trust investors, other than the DeBoard Group, should have received their first distribution checks last month, and I am now permitted to distribute the proceeds of some matured ABS policies as well as other funds I have been holding in escrow. Thank you for your patience in this process, because I know it was frustrating. The ABS Trust litigation resulted in approximately 472 more creditors with claims totaling $16 million being included in the bankruptcy, as well as $21 million face amount of insurance policies being added to property I can dispose of for your benefit.

C. Madison Creditor Liquiditidy Investors, 202 LLC ("Madison"): The U.S. Attorney's Office took the position that restitution claims could not be sold and assigned for less than the full amount of the loss. I conveyed this position to Madison, which purchased bankruptcy claims from some of you. Nevertheless, Madison began demanding reimbursement for any restitution checks I sent to investors, so I threatened to take this group to Court if they didn't back off. We have resolved the misunderstanding amicably and I am pleased to advise those of you who sold your bankruptcy claims to Madison that you will be able to keep your past and future restitution checks.

D. State of Florida: After considerable "discussion," the State of Florida agreed to turn over to the bankruptcy estate the fines the State collects from brokers, instead of depositing the funds in a separate account to fund the State's future investigations. So far, the State of Florida has turned over $48,004.00 representing settlement agreements reached with 20 brokers. The State's Controller, Mr. Robert F. Milligan, and the Orlando Office of the Department of Banking and Finance have been quite helpful in recent months and is expected to collect additional funds for distribution to all victims.

E. Bankruptcy Litigation: I have recently settled some matters and filed several additional adversary proceedings to go after a large number of companies and individuals who received funds from FinFed and ABS without providing value, for example:

1. Performance Marine: We sued Performance Marine, obtained a judgment and a lien on certain property, which property was sold for $420,000 in September, 2001.

2. CardCommerce: We have collected $430,000 from CardCommerce (owned by Messrs. Fontana and Linden) since July and I recently modified my previous settlement agreement to assist the company pay the remainder of its obligations (approximately $1.9 million) over the next two years with interest.

3. Norman Malinski: I settled for $100,000 from this lawyer, who had previously represented FinFed, Fred Brandau and Zane Balsam.

4. Village Cadillac: We settled for $75,000 with this dealership, which took FinFed funds and issued titles to Brandau family members.

5. Louis Ratfield: We obtained a judgment against Louis Ratfield, an alleged accountant who was paid $400,000 and did nothing for it. We were able to recover approximately $7,500 by garnishing bank accounts and are investigating whether Mr. Ratfield has other assets we may be able to recover.

6. Emerald Title Services, Inc.: We entered into a settlement agreement with Emerald Title Services, Inc., who received $60,000. Emerald agreed to pay the entire amount plus interest. So far we have received approximately $13,300 from them. I am not certain we will ever get the full amount, but am somewhat encouraged by their payments to date.

We have also sued a number of other transferees and made demands upon others, including lawyers, Denise and Heather Brandau, charities (like the zoo in Miami), charter fishing companies, motorcycle dealers, etc. We have engaged in mediation and settlement discussion whenever possible to keep fees down and have not been surprised that many of the transferees protest that they did nothing wrong and have no ability to pay the money back. In many instances, I believe that the transferees - like a charity or even a car dealer who delivered a car in exchange for money - had nothing to do with the fraud. However, under the bankruptcy laws I have a right to demand return of this money for you, and I have looked at every possible source of recovery. I am pleased with the results of the litigation since my last status letter and expect substantial amounts of activity over the next six months.

F. Sale of Viaticals: Very few viaticals have matured since the case was filed and many of the insurance policies now require premiums to be paid. Despite promises made to you regarding life expectancies, blood counts and high returns, FinFed and ABS surely overpaid for the relatively few policies they did purchase. Furthermore, advances in medical care are prolonging lives of people with HIV.

Marilyn Kohn, a lawyer in my office, and Scott Page, the viatical consultant we retained, have updated all the viatical files and have begun trying to sell some policies and determine which policies we should hold for a few years, if necessary, to maximize the return.

We are awaiting court approval to sell two policies with combined face amounts of $2.5 million for a total of $806,000. I should have these funds in February or March, in time for the next distribution. Hopefully, I will be able to sell some of the other policies for an average of 30-40% of face value. This is far less then FinFed and ABS paid years ago, even though you would think these policies would be far more valuable now that the originally projected demise dates have passed. Fortunately, Judge Ray has now determined that ABS Trust have no interest in the remaining $21 million face amount of unmatured policies.

I refuse to "dump" the policies and intend to hold onto the majority of them until I can obtain fair offers, like I did for the seized real estate.

G. Ray Levy and his Family: The government had not seized any of Ray Levy's real estate, boats or airplane and he disposed of many of his assets before I was appointed Trustee and well before I obtained a judgment against him. Mr. Levy appears to have used a portion of the proceeds to pay lawyers and to live without "income" from ABS or his other venture, U.S. Capital. After a few unsuccessful attempts to settle with Mr. Levy, I reached an agreement in March, 2000, which he promptly breached. I have subsequently been vigorously pursuing Ray Levy, his wife, and daughter, Ronalee Levy Orlick.

When we learned Mr. and Mrs. Levy were trying sell their home in Delray Beach, Florida, we filed suit and Judge Ray ordered the net proceeds to be placed in escrow while we litigated whether the house (and the proceeds) are exempt under Florida Law. We prevailed in Bankruptcy Court, but I expect Mr. Levy to appeal as long as he has any money to pay his lawyers. I have approximately $550,000 in escrow and hope it will be available for distribution within the next few months.

I am also holding the proceeds (approximately $194,721.00) from the sale of a house that was owned by Levy in Cancun, Mexico. Mr. Levy appealed the Bankruptcy Court ruling in my favor to the U.S. District Court and then the U.S. Circuit Court of Appeals. This ruling should be final in time for the next distribution in the Spring or Summer.

My lawyers went after funds held by Levy's lawyers and collected $18,650 from one and $110,000 from another. We are also attempting to collect the beneficial interests on a number of life insurance policies with First R&R Trust, a trust created by Levy which still has a beneficial interest in $1 million face amount of policies.

We also sued to assert a $237,000 equitable lien in the house owned by Ronalee Levy Orlick and a $23,847 lien on a BMW, and we just learned we were successful at the Bankruptcy Court level. The Bankruptcy Court also awarded $58,000 in interest for the two years Ronalee lived in the house she paid for with your money. My lawyers previously had the USMO seize artwork, computers, furniture, and certain jewelry in Orlick's house and I will be auctioning these assets soon. We intend to quickly foreclose on our equitable lien and force the sale of Ronalee Orlick's house.

H. Cost of Litigation and Administration: Subsequently to the plan being confirmed, I have received Bankruptcy Court approval to pay lawyers and accountants $575,272.42. I received a fee of $244,000 as Plan Administrator in August, 2001, which was the only time I have been paid since my appointment in November, 1999. Each statement is reviewed by me and shared with the Post-Confirmation Committee and then submitted to the Bankruptcy Court. We have a substantial amount of litigation in progress and I am satisfied the fees expended have been necessary. Having said that, I will continue to try to keep the costs low.

My lawyers and the class action counsel settled with the Stephens, Lynn law firm in late October and I expect to receive approximately $4.2 million for distribution to you in the late Spring or Summer after the class action settlement is documented and presented to U.S. District Court Judge Hurley. You will be receiving more pleadings and notices thoroughly describing the settlement terms, including payment of costs and attorney's fees and the approval (or objection) process. I am proud of this result and am pleased that these settlement funds will flow through the claims distribution process I established for criminal restitution and bankruptcy distributions, because it will surely be more efficient and less expensive.

CONCLUSION

I am pleased to send you this second set of checks and am hopeful the next checks will be sent out in the late Spring or Summer and that they will be larger.

I know this case has been devastating for many of you and that these checks and future ones will still leave you in financial and emotional despair. I have not given up and will not. It makes me absolutely sick when victims call me and tell me they are destitute and expecting all of their investment to be returned. This will never happen. The principals of the Ponzi scheme simply squandered too much money. Hopefully, some of the defendants will come forward with money they hid offshore, but we can not count on any cooperation from most of these people.

Monica Bruce, my paralegal, has agreed to continue working with me for a few more months to help address your questions and assist with remaining litigation. We have lots of matters pending and are still looking for assets and selling others. We are appreciative of the assistance we have received from the U.S. Attorney's Office, the FBI, and the U.S. Marshals Office, as well as various states. I think I have the best professionals involved and they are quite dedicated.

I suspect you will have questions after you receive this letter and the enclosed checks. You may call Monica on her direct line (305) 377-0661 or her assistant, Farola LaFond, at (305) 377-0648, Extension 318, but please be patient. We have more than 3500 victims and many calls each day.

We hope you have a happy and safe holiday.