And in an extraordinary revelation, the British agent in question Denis Donovan went on the record late last night to deny there had ever been a Republican spy ring at the Northern Assembly.
"The so-called Stormontgate affair was a scam, a fiction. It never existed. It was created by special branch," he told RTÉ news.
The Stormont Assembly was suspended in 2002 after three Sinn Féin officials, including Mr Donaldson, were controversially arrested and accused of running a republican spy ring from within the devolved parliament. All three were cleared of the allegation last week, appearing afterwards for a triumphant photo call outside Stormont.
However, in a dramatic twist yesterday, Mr Adams called an impromptu press conference in Dublin to reveal Mr Donaldson had admitted, during interviews in Sinn Féin's Falls Road HQ this week, to being a British spy for the past 20 years.
Several hours afterwards, Mr Donaldson himself admitted in an astonishing televised statement that he had been working for the RUC/PSNI special branch and British intelligence since the 1980s after being recruited when he compromised himself during a vulnerable time in his life.
"Since then, I have worked for the RUC/PSNI special branch. Over that period, I was paid money," he said before detailing some of his contacts with his security handlers.
Moreover, the unlikely spy made the explosive allegation that the republican spy ring at the centre of the Stormontgate controversy had been entirely staged by British intelligence.
"I deeply regret my activities with British intelligence and RUC/PSNI special branch. I apologise to anyone who has suffered as a result of my activities as well as to my former comrades and especially to my family who have become victims in all of this," he said.
According to Mr Adams, Mr Donaldson had been told by the PSNI earlier this week that his life was in danger since he was about to be outed as a spy. Mr Donaldson then contacted Sinn Féin and was interviewed several times on Tuesday and Wednesday, during which he admitted his secret double life.
Although Mr Adams accused "out of control" members of the British intelligence services of actively seeking to undermine the peace process, he said he would be surprised it Prime Minister Tony Blair knew of the affair.
"I would be shocked if, for one moment, I thought that the British Prime Minister was part of any part to take down a power-sharing executive that he had spent a considerable amount of time with the rest of us putting in place."
Speaking from Brussels, Taoiseach Bertie Ahern said he had always been suspicious of Stormontgate.
"This is as bizarre as it gets. We have always had our doubts about Stormontgate but I'd just like to hear all sides of it before I pass a judgement on it.
"Stormontgate never made much sense to me and the dropping of the charges made less, and this is just a bizarre twist. If what we are being asked to believe is that a senior Sinn Féin administrator in Stormont turns out to be an agent of the British security service, that takes some twist of even my imagination," he said.
In a statement last night, the Northern Ireland Office rejected the allegation that the police operation at Stormont in October 2002 had been for any other reason than to prevent paramilitary intelligence gathering.
"The fact remains that a huge number of stolen documents were recovered by the police. As a result of the recovery of these documents, a large number of people had to be warned...
"In terms of the dropping of the prosecution, that was a matter for the independent prosecuting authority and there was no political interference whatsoever in that decision," it said.