You are right that it could backfire, but to give you a much longer and more analytical answer, here is the picture as Farage understands it and why he did what he did:
- Farage is the leader of an insurgent party with the ability to command national media attention. He can make the main news channels attend.
- He was already MP with a large majority off a pretty good, recent turnout.
- There is no local media at all to speak of — no local newspaper worth a damn, no local TV, no other earned media
- The election is five or six weeks away.
- No national party can stand up an adequate candidate in a parliamentary constituency election in that time. It will be novices, first-time candidates with poor name recognition.
So the above is the election he wanted to fight, right?
If any of the main parties stand up candidates, they will all feel they have to contest it so as not to lose vote share to Farage, and Farage wins.
If nobody stands up, Farage wins.
And if a novelty candidate stands up, Farage wins.
Whichever way, the outcome after the by-election is the same as the one before: Farage is going to be the MP for Clacton. So given that this happens regardless — it cannot be stopped even though he started it for his own benefit — what is the best outcome for people who wish to see Farage politically damaged?
It is not the first one, because that is the specific outcome Farage wanted.
This way he now has to campaign around the simple story: he is fighting for his political skin, and his main campaign position to the people of Clacton (and deprived Jaywick) is that it's OK he's been given money and gifts by crypto billionaires and convicted fraudsters and that it's unfair for that to be investigated.
This is not at all a backhanded thing; it's open party politics. The last time this was done it was done to a fully establishment Tory (David Davis) who resigned to fight a by-election on a single issue.
He'll still be under investigation(s) when he comes back, and he won't be able to blunt the impact of those investigations by claiming that he has beaten all the establishment candidates. This is the best path forward.