The Wrexham Labour Party posted the picture attempting to link the Reform leader to the disgraced financier, who died in prison in 2019 while awaiting trial for sex trafficking charges.
He was convicted for soliciting prostitution from a 14-year-old girl a decade earlier.
After the BBC asked Welsh Labour where the Wrexham group got the image, the picture was deleted.
BBC Wales understands Welsh Labour asked the individuals who operate the account to delete the image.
A Welsh Labour spokesperson said: “The photo was posted from a volunteer-run account run by local members.
“The post was taken down when they realised it was an AI-generated image.”