Ben Zygier – the man known as Israel's Prisoner X, an Australian-Israeli citizen who died in mysterious circumstances while secretly imprisoned after an apparent career in the Mossad — had denied the "serious" allegations against him and was discussing a plea bargain just before his death.

In the latest twist in a story that has engulfed both Israel and Australia, Zygier's lawyer, Avigdor Feldman, told Israel's Channel 10 on Thursday that he had seen him the day before his death in 2010 and that he had appeared rational. He had, however, been put under intense emotional pressure by those interrogating him, which Feldman speculated could have contributed to his suicide.

"His interrogators told him he could expect lengthy jail time and be ostracised from his family and the Jewish community. There was no heartstring they did not pull, and I suppose that ultimately brought about the tragic end," he said.

Zygier, who was 34 when he died, was known by at least three different names and had reportedly visited countries hostile to Israel, including Iran.

The decision to allow Feldman to discuss his representation of Zygier in a case that had been covered for two years by a draconian gagging order, came as both Israel and Australia attempted to justify their roles in the affair. It suggests Israel is keen to counter claims that Zygier's secret and solitary confinement under a false name in Ayalon Unit 15, a secret prison-within-a-prison, did not mean he had not had legal representation. Earlier, Australian officials – reversing an earlier claim – admitted that they had known about Zygier's detention.

Defending his actions in trying to silence the Israeli press, the country's chief military censor, Brigadier General Sima Vaknin, insisted on Army Radio that the case had been examined by judges "from the district to the supreme court and by other people who do not take freedom of expression or state security lightly, and they were all convinced that issuing a gag order on this case was the right thing to do … This was an unusual gag order."

The latest revelations come amid a growing outcry over the case in Israel, with some comparing the treatment of Zygier to that meted out in the Soviet Union or Argentina and Chile under their military dictatorships.

The anachronistic role of both Vaknin and the Mossad have also come in for harsh criticism.

Under mounting pressure on Wednesday, Israel acknowledged for the first time that it had held a dual Israeli citizen under a false name for security reasons and that he had died in prison in 2010.

The story broke earlier this week when Australia's ABC reported that the prisoner, who it referred to as Ben Zygier, migrated from Australia to Israel in 2000 and worked for the Mossad.

The report forced the Australian government to admit that it had known about the case but had kept it under wraps after the Australian intelligence agency ASIO informed officials of Zygier's arrest. ASIO had been investigating Zygier for fraudulent use of passports for espionage purposes.

Speaking on Thursday, Feldman said: "I met a balanced person … He was rationally considering legal options.

"I can say that he denied the charges … The crimes he was suspected of were serious … He didn't admit to anything."

In one of the fiercest denunciations yet of the behaviour of the authorities and media in the Prisoner X affair, the veteran liberal Israeli journalist Gideon Levy, writing in Haaretz, condemned the state's ability to "disappear" people with the collusion of the press and courts.

"Alongside the organisations of darkness was the collaborating judicial system, the newspaper editors who were keen to bring back the days of the disgraceful editors' committee, the newspapers and the broadcast channels that only two days ago were trying to suppress the affair — all the agents, lawyers, jailers, censors, police and investigators who knew and kept quiet."