A warrant has been issued for Michael Brown after he went missing in July
A businessman whose company gave the Liberal Democrats £2.4m, used stolen money to fund the donation, London's Southwark Crown Court has heard.
The biggest donation in the party's history was designed to create a front that Michael Brown, 42, was a "well-connected man" prosecutors alleged.
Mr Brown is accused of nine charges, including fraud and money laundering offences. He denies all the charges.
The trial has begun in his absence, as he has been on the run since July.
Prosecuting barrister Martin Edmund QC said Mr Brown mislead investors to fund an "extravagant lifestyle", pay for business expenses and "apparently" donations.
"In particular, multi-million pound donations to the Liberal Democrat party, which enabled him to create the impression that he was an important and well-connected man," counsel added.
Among the claims, the prosecution claims that Brown stole more than $11m (£7m) from former Manchester United football club chairman Charles Martin Edwards and transferred criminal property worth a similar amount.
When Mr Brown's "lies" began to "unravel", the Glasgow-born businessman created false documents in a bid to stave off suspicion, Mr Edmund told the court.
In addition, he faces charges of perverting the course of justice.
'Illusion of wealth'
In order to present himself as a successful businessman, Mr Brown bought a flat and office in Mayfair, a Range Rover with a personalised number plate, a £2.5m private jet and a £327,000 entertainment system for his home in Majorca, the court heard.
In this way he managed to convince Mr Edwards to transfer $10m (£6.4m) into an HSBC account under Mr Brown's control.
According to the prosecution, Mr Edwards believed this money would be invested in bonds.
Mr Edwards was allegedly given the assurance that the investment was "risk free".
This promise was supported by an official-looking HSBC document which seemed to offer restrictions on what happened to the cash.
A bank stamp was even secured "to give it the seal of approval when in fact it was no such thing," claimed Mr Edmund.
Earlier, Judge James Wadsworth warned members of the jury not to let the defendant's absence affect their verdict.
"You must absolutely not take his decision not to attend as being a confession of guilt or an indication of guilt," he said.
A warrant was issued for Brown's arrest in July after he breached his bail conditions.
The trial continues.