When it comes to narrative complexity, there are few tales more tangled than that of J T LeRoy. A young, hipster author, LeRoy had apparently escaped a childhood of prostitution, homelessness and drug addiction on the streets of San Francisco when he published his first novel, Sarah, in 2000, while still a teenager. It was a vivid work of magical realism, based very loosely on his past, and the critical reception was rapturous.

The strange, androgynous author went on to publish a collection of stories and an illustrated novella, attracting attention from the likes of Courtney Love, Winona Ryder, Bono and Dave Eggers. LeRoy was famously reclusive - appearing in public in a strange blonde wig and huge sunglasses - but there were always celebrities on hand to perform the work he was too shy to read.

Then, early in 2006, after years of rumours, it emerged that J T LeRoy didn't actually exist. The young, former prostitute was, in fact, a fictional identity created by Laura Albert, a fortysomething Brooklyn-born mother. She had written the books herself and the person behind the sunglasses had been a female friend of hers, who had agreed to pose as "J T LeRoy".

The fallout from this revelation has been huge. Earlier this month, Albert was in court, accused of defrauding Antidote International Films, a production company that had bought the rights to Sarah. The film company argued that, since J T LeRoy doesn't exist, the contract that he had signed was clearly null and void and sued Albert for $110,000 - the amount it had spent on developing the potential film project.

Having had my own encounter with Laura Albert and "J T LeRoy" back in 2002, I've been following her court case with interest. At the time, I was going out with LeRoy's UK publicist and he invited me to dinner with the young author, who was then touring Europe with his friend "Emily" (a voluble, dominating woman who turned out to be none other than Laura Albert). The author's fame had reached such a pitch that Madonna had asked to meet him and "J T LeRoy", and "Emily" arrived for dinner with us directly from Madonna's West End dressing room. They seemed both excited and a little disappointed - Madonna had been friendly, but refused to have her picture taken with them, pleading unflattering lighting. We went to a Thai restaurant, where "Emily" grabbed my arm and swept me down to the toilets. Wasn't J T brilliant, she demanded, weren't his books works of genius?

Following last year's revelations, Albert has been perceived as manipulative and callous, a writer who created a tragic alter ego simply to gain attention for her work. The scandal over LeRoy's identity broke just a month after the James Frey affair - in which it emerged that Frey's bestselling rehab memoir, A Million Little Pieces, included a slew of fabrications. The two literary scandals were lumped together as cruel hoaxes on a public ripe for manipulation.

In court though, some of the real reasons for Albert's elaborate subterfuge came to light. She talked under oath about the sexual abuse she suffered as a child, her repeated hospitalisation for psychiatric problems and her work as a phone-sex operator. In many ways, the person she described - a child abuse victim who worked in the sex trade - was incredibly similar to the character she had invented. She said that J T was her "respirator", that she believed him to be real, that "he didn't want to go". On 22 June, she was found guilty of fraud.

The verdict was understandable - Albert had, after all, signed papers in the name of a person who didn't exist. Personally though, I hope she's able to avoid any further repercussions. Unlike the case of Frey - and those of countless other memoirists who have exaggerated their experiences to make their work more saleable - LeRoy's books were never presented as autobiography. In fact, the books were highly imaginative, bizarre, evocative works of fiction.

It would be a different case, too, if Albert had laboured to construct a highly plausible, professional front for her invention. The face that "J T LeRoy" and his entourage presented was always staged and confused, a literary travelling circus, which Albert has since referred to as "performance art". In the innumerable interviews that "J T LeRoy" gave, endless clues - confessions even - were offered. In 2005, for instance, LeRoy told the Observer, "if people want to say that I don't fucking exist then they can do that. Because, in a way, I don't . . . maybe J T LeRoy doesn't really exist. But I'll tell you one thing: I'm not a hoax."

And, going back to the books, this seems a fair assessment. The writing really wasn't a hoax. The books that Albert created retain their literary merit and there's something sad and sick that, for some, the work's value has plummeted just because its author wasn't actually pimped out as a child. With time, I hope that the outrage will fade, the court cases will dry up and that Albert will be able to get on with what she clearly does best - creating brilliant fictions.

Kira Cochrane is women's editor of the Guardian