The saga started in March when the Aquarium Gallery in Farringdon, London, hosted a high-profile art auction to raise more than £230,000 for the former mayor's re-election campaign. The Banksy canvas was the star lot among the works donated by artists including Marc Quinn and Antony Gormley.
It was the final work to go under the hammer and attracted frenzied bidding, leaping quickly to £100,000 and beyond. Mr Livingstone said he was "completely light headed" when the bidding approached £200,000.
With Labour more than £17m in the red, officials were delighted at a rare piece of positive news. But they realised belatedly that they could not accept the full sum for Banksy's work.
To add insult to Labour's financial loss, the Mail on Sunday claimed last month to have at last unmasked Banksy as a 34-year-old "nice middle-class" former private school pupil called Robin Gunningham. The artist has repeatedly declined to deny the report.