Arron Banks, UKIP's largest donor, has said he will start a new political movement after being suspended by the party.
He said his UKIP membership had lapsed and he was told he would not be allowed to reapply until an appearance before the party's executive committee.
The multi-millionaire insurance executive had recently been openly critical of UKIP leader Paul Nuttall and said he planned to challenge Douglas Carswell - the party's only MP - in the next General Election.
Mr Banks defected to UKIP from the Conservatives in 2014, and gave £1m to UKIP ahead of the 2015 General Election.
He also funded the Leave.EU campaign in the Brexit referendum.
In an open letter in February, Mr Banks suggested he should be made party chairman in order to transform the way UKIP operates.
Mr Nuttall had replied saying while "any and all contributions to our work are welcome ... the party chairmanship is not on offer".
He had also warned Mr Banks about any further criticism of the party on social media.
A statement from Mr Banks posted on the Leave.UK Twitter account said: "UKIP has somehow managed to allow my membership to lapse this year despite having given considerably more than the annual membership fee over the past 12 months.
"On reapplying I was told my membership was suspended pending my appearance at an NEC meeting.
"Apparently, my comments about the party being run like a squash club committee and Mr Carswell have not gone down well.
"I now realise I was being unfair to squash clubs all over the UK and I apologise to them.
"We will now be concentrating on our new movement."
On his personal Twitter account he speculated that his suspension was "apparently for saying current leadership couldn't knock the skin off a rice pudding!"
Hinting at a new political project, he wrote: "UKIP 2.0, the force awakens".
UKIP has denied his party membership was suspended, saying: "Mr Banks was notified last year that his membership was due for renewal at the start of October but chose not to renew, despite reminders. With this his membership expired on January 1, 2017.
"It would not be possible to suspend Mr Banks from something of which he is not a member."
Mr Banks has previously spoken about setting up an anti-establishment party similar to Italy's Five Star movement, with radical policies on housing, immigration and the nationalisation of utilities.
Inspired by the US President's calls to "drain the swamp" in Washington DC, Mr Banks - who visited Donald Trump alongside former UKIP leader Nigel Farage after the US election - has spoken about his ambition to overhaul Westminster politics.