A British man who fooled the media into believing he was an al-Qaida insider has admitted in court that he made up the claims.

Hassan Butt received significant media attention for his claims to have helped send scores of Britons to terrorist training camps overseas and to have met Mohammad Sidique Khan, the ringleader of the 7 July 2005 attacks on London.

Butt was the former spokesman for the extremist group al-Muhajiroun and was invited to meet a government minister to discuss ways to combat terrorism, as well as featuring heavily in BBC News, national newspaper and US television reports on al-Qaida.

However at a trial of another man accused of terrorist offences, Butt said he had told journalists stories "the media wanted to hear", admitting that he was "a professional liar". He also admitted faking his own injuries to make it appear that he had been attacked by extremist Muslims.

Butt was arrested in 2008 over his planned autobiography Leaving Al Qaeda: Inside The Life And Mind of a British Jihadist, in which he was planning to claim involvement in the US consulate attack in Karachi, Pakistan, in June 2002, which killed 12 people.

The book was being co-authored by freelance journalist Shiv Malik, who became a media cause celebre after counter terrorism officers demanded he hand over his notes.

But in court Butt agreed he had taken Malik for a "right patsy".

Cross-examined by Andrew Edis QC, prosecuting, Butt was asked: "So, you were a professional liar then?

Butt replied: "I would make money, yes."

Edis continued: "If the money's right you'll say absolutely anything?"

"Absolutely anything, yes," Butt said, "If I wasn't going to cash up on it, someone else was going to cash up on it."

Butt's admissions at Manchester crown court were made in December and can be reported today because legal restrictions have been lifted. It is understood Greater Manchester Police's counter-terrorism unit, who arrested Butt, are satisfied he is a fantasist, albeit one with links to three convicted terrorists.

In 2007 he wrote he had left the "British jihadi network" of which he claimed the 7/7 London bomber Mohammad Sidique Khan was a member  someone he said he had met on two occasions.

He went on to hold talks with former security minister Tony McNulty who Butt said "absolutely loved" his ideas on reforming radicals.

He confessed he had also stabbed himself in the arm to make it appear as if he had been attacked by extremists for speaking out against violence.

Speaking of Malik, Butt told the jury: "I guess he wanted to make his career out of the back of my story. Many people were making a career out of being former radicals. I had to take it one step further and actually say I was a terrorist, which wasn't true.

"At no point have I ever been training, have I ever been a jihadi. Yes, I did study their theology. Yes, I did study their ideas because that then came into part of how to actually counter this. And that changed to a fact of, well we need to keep as many young Muslims away from these people. And in order to do that I needed to understand the mindset in the first place."

After terrorists struck London in 2005, Butt renounced his previous talk of violence and set himself up as an expert in countering al-Qaida. Moderate Muslim groups he had previously branded as sell outs, such as the Muslim council of Britain, he decided to label as extremists.

Butt, 28, of Cheetham Hill, Manchester, has been arrested on five occasions by counter-terrorism officers  November 2002, November 2003, December 2004, October 2007 and May 2008. Each time he was released without charge.