Ian Strachan, 30, who is facing trial over a plot to blackmail the royal family member, bragged to his legal team that he met the two royals as well as Zara Phillips.
The Scot-born businessman was arrested together with 40-year-old Sean McGuigan when police raided a London hotel as they allegedly showed footage of an aide snorting cocaine and bragging about a sex act with the royal, the Mirror reported.
Strachan and MCGuigan claimed the tape showed the unnamed individual engaging in oral sex and insinuated that the royal had supplied cocaine to an aide.
The video footage is also said to contain a number of unsubstantiated allegations against other members of the royal family, including Queen Elizabeth II.
The pair was charged with blackmail and are in custody.
Scotland Yard said: "Investigations continue."
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