Rabbi Baruch Chalomish, 54, rented an apartment where he could "relax and have a party", Manchester Crown Court heard.
When police raided the apartment, and his home in an area of Salford heavily populated with Orthodox Jews, they discovered a total of 101 grams (3.6oz) of cocaine and more than £17,000 in cash.
Prosecutor Michael Goldwater also told the jury of five men and seven women that Chalomish's business partner, Nasir Abbas, 54, had failed to turn up for the trial and is sought by police.
The pair are both charged with possession of cocaine, and possession of cocaine with intent to supply.
Chalomish faces two charges on both counts, and Abbas faces one charge on both counts, which he denies.
The rabbi, of Upper Park Road, Salford, admits two counts of possession of cocaine but denies intent to supply.
Mr Goldwater said police found both defendants at the one-bedroom apartment when they raided it at 9am on Monday 5 January.
Abbas was discovered sleeping on the floor of the sitting room, and Chalomish was using the toilet.
He said: "Our case is that Abbas and Chalomish were dealing in controlled drugs. They were running, we say, a commercial cocaine supply operation from an apartment-hotel in Shudehill, Manchester.
"Rabbi Chalomish also had a substantial store of drugs, cocaine, and cash at his home address."
Officers found forms which showed that the apartment was rented from the firm Premier Apartments in Abbas's name.
Mr Goldwater said officers discovered evidence of a "substantial drug supply operation".
Drug paraphernalia found in the bedroom included a glass tray with 3g (0.1oz) of cocaine on it and a silver spoon, a bowl containing more than 3g (0.1oz) of cocaine, rolled up notes for snorting the drug and credit cards used for chopping the drug into lines.
Mr Goldwater said the purity of the cocaine varied in strength from 29 per cent to 82 per cent.
Cutting agents to dilute the drug were also discovered, along with around £2,400 in cash, he said.
Similar paraphernalia, and quantities of cocaine, were also found at Chalomish's home, mainly in a rear bedroom, along with £15,345 in cash.
Mr Goldwater said the jury may find it "significant" that the purity of the cocaine was higher than average.
He suggested it could have been cut with legal substances to achieve the average purity level of 28 per cent for cocaine sold in the UK.
Mr Goldwater also told the jury that police seized a mobile phone containing a text message from Abbas to an unknown recipient.
He said: "That's a drug dealer's message and we say that was sent by Abbas from his phone to somebody who has not been identified and is essentially a statement of account with reference to grams and money and setting out who owed who what."
The jury heard that when interviewed by police Abbas said he knew the rabbi as "Shell" and rented the apartment on his behalf and received money from him for the rent.
Mr Goldwater said: "He said Shell wanted to relax and have a party at the flat.
"He said there had been a lot of people come through the flat in the last 10 days, most of them girls. He mentioned one particular girl, called Emma from Stockport, who stayed for seven days.
"She was the only one allowed to go into that bedroom apart from Shell."
Abbas told detectives his role was to keep the flat tidy and said that although Shell did not sell drugs, he did not mind if others wanted to consume them and that he liked to impress girls.
Mr Goldwater continued: "He said he had seen Shell putting white powder in a glass dish and mixing it with another substance, and anyone visiting was free to help themselves."
Abbas also claimed that he and Chalomish were planning to open a restaurant together, funded by the rabbi.
Mr Goldwater told the jury that Abbas had a previous conviction for conspiracy to supply Class A drugs in March 1996.
The jury heard that the rabbi gave "no comment" interviews to police until his final interview, where he admitted he was a wealthy man who liked to assist less fortunate people.
Chalomish said he bought large quantities of cocaine for his own personal use and often used it when he could not sleep.
Mr Goldwater said: "The prosecution case is these two men were concerned in a commercial drug supply operation.
"We don't completely exclude the possibility that there might be some truth in what Abbas told the police, that some of the drugs were given to young women who came to the flat and that one or more of those young women may have provided sexual services.
"We do say that it was essentially a commercial operation. We say their roles were different. Nasir Abbas had the know-how, knew the drugs business, had the contacts, he would know where to obtain the drugs, how much to pay and how to find customers.
"Rabbi Chalomish would not have necessarily had the knowledge, we say Chalomish was the financier, he put up the money.
"We've been informed that Chalomish is a wealthy man, we've got no reason to doubt that. Nor do we have any reason to believe that his wealth was not achieved perfectly legitimately.
"How he got in the drugs business is unclear. He may have got into the drugs business as a drugs user but may have realised there were substantial profits to be made.
"A supply on this scale would need a source of capital for financing the purchase of the drugs and rental of the flat so dealing could go on off the street and not at his address."
The case was adjourned until 10.30am tomorrow at Manchester Crown Court.
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