You are right. (나는) 후배가 한 잘못을 알고 있었지만 (후배가) 미안해할까 봐 모르는 척했다. => 나는 후배가 한 잘못을 알고 있었다. 하지만 후배가 미안해할까 봐 나는 그 잘못을 모르는 척했다.

히히, 고마워요 ^^

Ah, correction. I checked with my coworker, and it should translate similar to how you said. However, "-할까 봐" grammar is usually considered to be "afraid of smth, so smth." In this case coming out such as "I knew the mistake of the junior, but I was afraid they would feel sorry so I pretended not to know."

I would read this with the subject still being 후배, meaning such as "The junior knew what he did wrong, but was afraid of being blamed so he pretended he not to know."