(Reporting by Ned Barnett in Chapel Hill, N.C.)

Author John Grisham, master of the legal thriller, says the real-life fraud scandals involving Bernard Madoff and Allen Stanford trump even the gripping fiction of his novels.

He says he is fascinated by the accusations of multibillion dollar Ponzi schemes, involving tangled webs of companies and offshore banks, which have put Wall Street financier Madoff in jail for 150 years and are also leveled against Texas billionaire and sports entrepreneur Stanford.

Madoff pleaded guilty in March to a $65 billion fraud and was jailed in June, while Stanford has pleaded not guilty to charges that he bilked investors in a $7 billion swindle.

“The thing about Bernie (Madoff) and Allen Stanford, you know, if I wrote that stuff nobody would believe it,” Grisham told reporters at the opening of the North Carolina Literary Festival at the University of North Carolina.

Lawyer-turned-author Grisham, 54, known for his works like “The Firm,” “The Testament” and “The Runaway Jury,” which probe such human failings as greed and deceit, said his imagination is no match for the stories behind real super swindlers.

“I just can’t get enough of this stuff … I love their stories — not for the human drama and the pain and suffering of it, that’s terrible — just for the sheer brazenness of these crooks,” he said.

“Stuff like a $65 billion Ponzi scheme by this guy who was very highly regarded and had loyal, loyal clients for many years and just devoured them. I can’t make it up fast enough and I can’t keep up with reality,” he said, referring to Madoff’s case.

The accusations against Stanford, whose business empire stretched from the Caribbean to the United States, Latin America and Europe, include an allegation that he performed a “blood oath” brotherhood ceremony in 2003 with a top financial regulator in Antigua and Barbuda to try to protect his banking business on the island from U.S. investigators.

Grisham says he “reads the newspapers” to find ideas for his thrillers but doesn’t completely depend on them for inspiration.

“I have too many other ideas to work on,” he said.

U.S. securities regulators missed repeated chances to uncover Bernard Madoff’s Ponzi scheme, a sharply critical review by a federal watchdog said on Wednesday.

Read the full report below:

Welcome to our live coverage of the Bernie Madoff sentencing. Reuters journalists are outside and inside the Manhattan court where the admitted thief will hear his punishment for running Wall Street’s biggest and most brazen investment scheme. Reuters.com’s intern, Franz Strasser, is sending us updates from the scene that you can follow in the live headline box below.

(Editor’s note: Readers’ comments will appear in a smaller font.)

Update: The live coverage has now ended, but you can still leave a comment below.

The SEC’s decision to let Ponzi schemer Bernard Madoff off with a “no admission of wrongdoing” settlement could be defended on a number of levels, but none will be very satisfying on a day when the Obama administration is set to give the much-maligned regulatory body sweeping new powers to oversee U.S. securities markets.

Madoff pleaded guilty to a $65 billion investment scam in a separate criminal case and faces sentencing on June 29. There is no way he is ever returning to Wall Street, and he is probably going to jail for the rest of his life.

One might consider it a waste of SEC resources to pursue the case any further. And there’s poetic justice in the agency, which for decades missed the biggest fraud on Wall Street, being denied any satisfaction in the courtroom. SEC sources said the deal with Madoff is in line with a February settlement that also included no admission or denial of the findings.

But with the president just hours away from unveiling his plan to boost the SEC’s resources and widen its mandate to catch future Madoffs, it may have been worth keeping a lawyer or two on the case — for appearances’ sake.

One of the more striking aspects about the Madoff affair is the large number of people who appear to have been 'hooked' on Madoff products.

Money managers were drawn by Madoff's air of mystique, his stellar reputation as a market timer, the apparently steady returns with rock bottom volatility and the absence of fees, which some collected from clients anyway.

Those wanting more could simply have increased allocations but some chose to create new investment vehicles instead. Behind the banks and asset managers which lost money, some names appear again and again.

Take the circle of managers revolving around Sandra Manzke, founder of Tremont, whose Rye unit lost substantially all of its roughly $3 billion in assets.

Tremont and Bermuda-based Kingate Management also set up Kingate Global, a Madoff feeder which lost $2.7 billion, and Manzke was on the board of the fund, the Financial Times reported earlier this year.

Manzke's presence at the founding of Kingate was confirmed by a source close to Kingate who asked not to be named.

In 2006 Manzke left Tremont to found Maxam Capital, a Madoff feeder widely reported to have lost $280 million.

Returning to Kingate, there were other less well-known names who were also caught out by the Madoff bug. One was Christopher Wetherhill, president and director of Kingate Management and a director of Kingate Global and of another Madoff feeder, Kingate Euro.

Wetherhill was also founder and, until 2000, chief executive of Hemisphere Management Ltd, once reputedly the third-largest hedge funds administrator in the world, overseeing assets of over $51 billion, including those of the Kingate funds.

Thus Wetherhill could know how and where Kingate money was invested, as well as what happened to the commissions the company took in over the years.

Former Kingate clients are anxious to locate these commissions, one lawyer acting for them has told Reuters. He estimated they could total as much as $500 million.

The bulk of Kingate's assets were sourced through its consultant, FIM Advisers, a London-based asset manager founded by Carlo Grosso and Federico Ceretti.

FIM has played down its relationship with Kingate but two sources familar with the situation have told Reuters that Grosso and Ceretti were synonymous with Kingate and had been present at its founding.

When Wetherhill left the helm of Hemisphere, he was replaced by Tom Healy, who later became chief operating officer and a board member of FIM.

Wetherhill is also the named by Madoff Trustee Irving Picard as the contact point for Whitechapel Management Ltd, a Bermuda-based firm which appears on Picard's long list of Madoff clients.

Another ubiquitous presence in the FIM-Kingate-Tremont triangle is New York lawyer Michael Tannenbaum, a founding partner of the law firm Tannenbaum Helpern Syracuse and Hirschtritt LLP.

Kingate’s fund offering documents say Tannenbaum, an outside director of the manager since 2000, is a senior partner of a law firm that advises both funds, the manager (Kingate) and the consultant (FIM), a potential conflict of interests.

Tannenbaum's firm is also legal counsel for affiliates of Tremont and Rye.

Perhaps understandably, none of those named is keen to revisit their Madoff experience, nor their links with each other.

Wetherhill offered a no comment, as did a spokesman for Manzke. Calls and emails to Tannenbaum went unanswered.

Numerous calls to FIM have not been returned, and questions on the relationship between Kingate, FIM and Hemisphere emailed to the company's general counsel Philip Niel remain unanswered.

It's hard enough for fund firms to get investors to put money into markets when stocks are so volatile, but it seems they're also still having to wrestle with the bad publicity from U.S. financier Bernard Madoff's giant fraud.

Ashraf Mohamed, portfolio manager and head of Islamic funds at investment firm Stanlib in South Africa, told the London leg of the Reuters Islamic Banking and Finance Summit that investors are still nervous of another Madoff.

"All they are doing right now is saying we want to make sure there isn't any risk. One comment is 'let's make sure we don't have another Bernie Madoff situation'," Mohamed said.

However, he doesn't seem too worried about a repeat of the massive Ponzi scheme.

"My take is that it's all hit the fan," he said. "You don't need to concern yourself with assets being inflated (or) with people trying to deceive you because that's come and gone."

There seems to be an endless wave of bad news hitting the hedge fund industry at the moment -- gates and suspensions, record poor performance, the Bernard Madoff scandal and so forth -- but there are still one or two reasons to be positive.

According to a survey of institutional investors by alternative assets data group Preqin, conducted in January (and therefore after the alleged Madoff fraud came to light), only 8 percent said they were no longer confident about hedge funds and would reduce investments.

By contrast, 26 percent said they would be increasing their allocations this year.

This appears to be a more positive picture than for high net worth individuals, who, according to some anecdotal evidence, have become more cautious on hedge funds.

Institutions such as pension funds, in contrast, tend to have time horizons running into decades, so a year of bad performance is not necessarily the be all and end all.

They have also seen equities, which constitute a far greater portion of their portfolios, plummet last year, leaving hedge funds, relatively speaking at least, looking quite good.

Having followed wealthy individuals into hedge funds and helped fuel the industry's massive growth of recent years, they could end up supporting it through the difficult times.

But the survey also highlights some less appealing trends for hedge fund managers.

The industry's lucrative 2 and 20 fee structure looks more and more under threat, with around 35 percent of institutional investors saying they felt more confident to negotiate fees.

And some investors in the survey said they would no longer invest in funds of funds because they didn't think they were value for money.

For a section of the industry already under pressure -- for performing even worse than single-manager funds, after a huge rise in the dollar hit cash reserves and because some fund selectors failed to spot Madoff -- this is yet another ominous sign.

In the words of Warren Buffett, “You always find out who’s been swimming naked when the tide goes out.” But recent months have shown that the nudist beach extended far beyond Wall Street, and beyond the dreams of pioneering schemer Charles Ponzi (above).

For those following along at home, here is a run-down of alleged Ponzi schemes and other scams that have recently emerged during the financial crisis. Pay attention: you can’t tell the faked deaths without a scorecard.

Nicholas Cosmo, Agape World Inc

This Long Island businessman purported to provide commercial bridge loans, but was instead operating a $400 million Ponzi scheme in which early investors are paid with the money of new clients, officials said.

Cosmo was previously convicted of a federal charge of felony fraud and swindle in 1999 and sentenced to 21 months in prison. According to the firm’s website it has made commercial bridge loans, construction loans, acquisition loans and financing for properties nationwide with capital obtained from private sources since 1999.

Arthur Nadel, Scoop Management

The SEC charged Nadel with defrauding investors at six hedge funds he controlled. Nadel overstated the value of the funds by more than $300 million, providing bogus information on their returns and sending investors false statements, the SEC said. The actual value of the funds’ holdings was about $507,000.

Nadel was reported missing by his family after he left behind a suicide note that expressed guilt for losing clients’ money and said someone might try to kill him. He was arrested on Tuesday — very much alive — by FBI agents in Tampa.

Marcus Schrenker, Heritage Wealth Management

Schrenker, wanted in Indiana on financial fraud charges alleging he misled consumers who invested money in his wealth management companies, parachuted out of his plane over Alabama and let it crash in Florida.

After he radioed a distress call over an imploded, authorities dispatched two military F-15 fighter jets, who saw that the windshield was intact, the door was open and there was no sign of the pilot. Schrenker parachuted safely to the ground, got a police officer to give him a ride to a hotel and then fled. He previously stashed a motorcycle near the hotel and got away before local police learned of the plane crash.

He was arrested a day later at a campsite and taken to a hospital with wounds to his wrists that apparently resulted from a (non-fake) suicide attempt. According to the Associated Press, Schrenker faced at least $9 million in legal judgements.

Bernard Madoff, Madoff Investment Securities LLC

On financial scale alone, Madoff’s alleged fraud puts him well ahead by several orders of magnitude. The financier is accused of one of the biggest scams in Wall Street history, and allegedly told his sons that losses totalled $50 billion. Prosecutors allege that since 2005 he had been runing a Ponzi scheme in which early investors were paid off with money from later investors.

Madoff, a self-made titan who began in business with funds that he earned as a lifeguard, drew flocks of affluent investors in New York, Palm Beach and beyond with his track record of consistent returns in both bull and bear markets.

It emerged in the wake of the scandal that Madoff’s investment fund may never have executed a single trade.

Marc Dreier, Dreier LLP

Dreier, a prominent New York lawyer who heads the 250-attorney law firm Dreier LLP, is charged with perpetrating a brazen, $100 million real-estate investment fraud that targeted hedge funds.

Authorities said that since October, Dreier had marketed fake promissory notes, including bogus notes of a New York-based real estate development company, to hedge funds and other private investment funds, and that he had closed at least three sales.

They contend that Dreier created an elaborate cover-up to convince purchasers that the notes were real. Prosecutors said he distributed phony financial statements and audit opinion letters to keep the charade going. In one instance, prosecutors said, an unspecified New York-based hedge fund wired about $100 million to an account Dreier controlled in payment for the bogus notes. In another, Dreier is accused of enticing a Connecticut fund to wire $13.5 million to his account to purchase the notes.

Samuel Israel, Bayou Capital

Israel, who ran the Connecticut-based Bayou hedge fund, pleaded guilty in 2005 to charges of conspiracy and fraud for cheating investors in a $450 million scam. He and several of his partners fabricated portfolio returns and concocted a phony accounting firm to keep the ruse going for years.

In June 2008, Israel sought to dupe police into believing he had committed suicide when he abandoned his car on a New York bridge above the Hudson River with the words “suicide is painless” written in the dust on the hood.

But no body was found, and police quickly labeled him a fugitive. After hiding in a mobile home, Israel surrendered to authorities in Massachusetts on July 2 and was transferred back to New York. He has remained in a federal holding facility since.

Click here for more notorious financial scams.

Not everyone in the orbit of accused mega-thief Bernard Madoff wants to give him the old pitchfork-and-torches treatment. In the past 24 hours, I received two press releases touting book deals for reporters who are going to write about the man who purportedly stole $50 billion from a variety of rich people, hedge funds, charities and universities.

Here is an excerpt from the first one:

The Portfolio imprint of Penguin Group (USA) Inc. has acquired DON'T ASK, DON'T TELL by Erin Arvedlund, a journalist who in 2001 wrote one of the first critical articles about Bernard Madoff, the recently indicted financier. World rights were bought by Adrian Zackheim, President and Publisher of Portfolio, from Esmond Harmsworth of Zachary Shuster Harmsworth. Publication is planned for the spring of 2010.

Arvedlund's book, combining narrative and analysis, will share the same title as her May 2001 article in Barron's -- one of the first to ask tough questions about Madoff's surprising results and unusual practices. That article, based on a four-month investigation and hundreds of interviews, was recently cited in an SEC complaint.

And here is the second:

Times Books, an imprint of Henry Holt and Company and a co-publishing venture between Holt and The New York Times, is proud to announce that editorial director Paul Golob has acquired world rights to a new book by New York Times senior financial writer Diana B. Henriques, which will investigate the crimes and consequences of the Bernard Madoff scandal. The deal for the book, tentatively titled A World of Lies, was negotiated by Henriques's literary agent, Fredrica S. Friedman.

And a bit more:

Through her long career covering Wall Street, Henriques has developed an impressive roster of trusted sources whose insight and specific knowledge of Madoff's fraud will provide her book with unmatched depth and breadth. Over the course of her career she has interviewed Bernard Madoff himself several times, and she is deeply familiar with the role he has played on Wall Street as an innovator and, now, as a swindler. No other reporter brings to this story Henriques's level of experience and knowledge, and her book promises to be the definitive account of what Madoff did, how he pulled it off, how it all came crashing down around him, and its implications in the United States and around the world.

The only question now is which one will get optioned for Hollywood treatment first.