Or a situation where the guy who an undercover agent approaches tells his superiors? Who then want him to go undercover to find out who the suspected foreign agent works for.
I’m sure this can happen in government.
Also the Book "A Scanner Darkly" by Philip K Dick which (no spoiler) explores the consequences of deep undercover.
Also, your username totally caught me off guard and made me laugh.
There's a subplot vaguely along the lines of everyone being an undercover, although saying more would be a bit too much of a spoiler.
Part of the reason they never tried Ross Ulbricht for the hit jobs is because a rogue FBI office in Baltimore was staging the hits in a studio (the evidence to show Ross, to get the rest of the payment), and the FBI office in Chicago also investigating Silk Road was like "why are you guys roleplaying, this can't be as cringy as it looks, what is going on in Maryland", and the Secret Service and DEA agents were roleplaying as moderators on Silk Road and creating fake controversy to both Ross Ulbricht and the FBI offices investigating, just so the Secret Service and DEA could extort Ross (for the fake hits) and ride off into the sunset with the money, landing a movie deal with Fox. They're in jail now. And the hitman stuff was dropped under equally fake pretexts just to save face.
The Secret Service and DEA agent were being tried at the same time as Ross Ulbricht was, this information and evidence was kept from Ross and his trial and only came to light afterwards. Wasn't accepted in the appeal. Sentencing didn't factor any of this in either. Embarrassing case.
https://www.vice.com/en/article/8q845p/dea-agent-who-faked-a...
There was once a bank that looked the other way when lots of shady cash came in, allowed transfers of those amounts to to foreign banks, basically ignored KYC rules, etc. Word got around, and lots of criminals all over started using this bank for all of their money laundering purposes.
Some banking authority started noticing a lot of suspicious transactions, and was preparing to shut the whole thing down, disconnect the bank from all transfers, raid offices, arrest employees, trumpet press releases about how they're protecting the American financial system, etc... (ie, exactly what they are supposed to do).
The bank was, of course, a honeypot run by some other 3-letter agency, who was actively facilitating money laundering in order to collect enormous amounts of info about who was involved.
(basically the banking version of that 'encrypted phone' scheme).
The raids were mere hours away when someone put two and two together, and managed to get it called off.
It has happened several times with cops.
Feds are a bit more professional I believe.
https://rmx.news/germany/german-domestic-intelligence-agents...