A video shows auction-goers shocked at what they saw, with cell phones out as they saw the half-shredded painting being taken down to be given to the winning bidder. And in true satirical Banksy fashion, he quoted artist Picasso in his caption: "the urge to destroy is also a creative urge".
"Girl With Balloon", which depicts a small child reaching up toward a heart-shaped red balloon, was originally stenciled on a wall in east London and has been endlessly reproduced, becoming one of Banksy's best-known images.
The anonymous buyer of a Banksy painting that mysteriously shredded just after it was auctioned off at Sotheby's last week plans to keep the work.
But it was quickly evident that one of the art world's most fascinating figures had orchestrated his most daring and brilliant stunt yet. "The shredding is now part of the integral artwork".
Banksy is a Bristol-born artist whose true identity - despite rampant speculation - has never been officially revealed.More news: Timberwolves asked Sixers for Simmons in potential Butler trade
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Alison Young, a professor of criminology at the University of Melbourne who has studied street art and Banksy for years, said this was far from a prank gone wrong.
Branczik says the new work is "the first in history to have been created live during an auction".
Banksy in 2013 set up a stand near the city's Central Park and sold 20 signed canvases of his own work for $60 each.
The bidding climbed to an extraordinary US$1.4 million, an amount that tied the artist's own auction record from 2008.
The spray-painted canvas "Girl With Balloon" went under the hammer at Sotheby's in London, fetching more than three times its pre-sale estimate and equaling a record price for the artist.
Banksy was also claimed to have been pictured this year after one of his work's appeared on the disused Scott Street Bridge in Hull.