As the plt & 16 jumpers deptd on a skydiving flt, the eng lost pwr at aprx 300′ agl. The acft then banked steeply left, spiraled in a steep nose dwn attitude & crashed. An exam revealed fuel in the tanks was contaminated with wtr & foreign material with the appearance of brown algae. Milky fluid (aprx 65% jet fuel & 34% wtr) was fnd in the eng fuel control, as well as iron contaminants. Dark stringy material was fnd in the fuel filters. The acft had been refueled fm 55 gal drums which contained contaminated fuel. The drums were stored upright & rain water could leak thru the filler caps. N551cc had a history of fuel contamination which on occasions caused the fuel bypass indicator to display. Rprtdly, the stall warning circuit brkr had been disengaged on other occasions, so as not to startle the jumpers; however, due to dmg, its preimpact psn could not be verified. Acft was estd to be 370 lbs ovr its max wt lmt & 1′ fwd of the cg lmt. The9 pax seats had been rmvd to haul up to 18 jumpers. Pax seat belts were not used. Lack of faa surveillance was noted.