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Farage engineered this situation to try to take control of the narrative about the investigation into £5m of undeclared income/gifts.

They neutered that move by not entering the contest in the first place. And Binface (with support of 32 other candidates) turned it into a humiliating exercise.

A "serious" by-election is what Farage wanted. You don't protest by playing along. You protest by doing your best to express how much of a farce it is.

Farage can't say "The people want me more than your other serious candidates even after this controversy" if there are no serious candidates running.

I get that, but if this was actually a chance to beat him, wouldn’t that have been better?

They wouldn't have beaten him. Farage would win and he knows that otherwise he wouldn't have called the by election.

Ah, okay, then that makes sense. Thanks :-)

They plan to eject Farage from Parliament after their investigation concludes. Farage was trying to delay the investigation, or perhaps prove a point that his voters don't care.