'Prisonor X': Ben Zygier. Divided into two parts, the cell's larger area contains a bed, a sitting area and a kitchenette, while the smaller section is a washroom equipped with a shower and toilet. When the guards finally entered the cell at 8.19pm, they found Zygier's body hanging cold and lifeless. "Our job is to isolate him, not to keep him alive", said one of the guards who attended the scene. Even to his prison guards Zygier was known only as "Prisoner X"; his prison cell contained no name, no photo, no legal charges. Thanks to a court-ordered ban on any reporting of Zygier's case by the Israeli media, and his parents' determination to keep their son's death a private affair, only fragmentary details had leaked out.

At rest: Ben Zygler's tombstone in a cemetery in Springvale, Victoria. Credit:AFP Aired in public for the first time by the ABC's Foreign Correspondent program last month, the circumstances surrounding his death have remained so mysterious that at least one member of Israel's parliament went so far as to suggest that Zygier had been murdered. But now, after a months' long investigation it can be revealed for the first time that Zygier – unintentionally – crossed a line that no agent before him had ever crossed. Spy: Ben Zygier. This investigation began with a phone call to Fairfax Media's Jerusalem bureau in October 2009, and was concluded by a team of reporters assembled by Germany's Der Spiegel magazine.

It involved extensive research conducted in Israel, Lebanon, Italy, Britain and Australia, plus interviews with former friends, business partners, employees of several intelligence agencies and governments, as well as with Zygier himself shortly before his arrest. Israeli informants have certainly changed sides in the past. But a regular Mossad employee has never done what Zygier did. This is the story of the tragic downfall of a passionate Zionist, a young man who had so aspired to a life of heroism, and yet, in the wake of his own shortcomings, willingly gave away such sensitive information to the enemy that it represents one of the most serious security breaches in Israel's 65-year history. Growing up in Melbourne's south-eastern suburbs, Ben Zygier enjoyed the happiest of upbringings. His father, Geoffrey, ran the family muesli company before selling the business and taking on a number of senior roles within Melbourne's Jewish community, including a stint as chief executive of the Jewish Community Council of Victoria. Educated at the King David School, and later at Bialik College, Zygier joined the left-wing Zionist youth movement Hashomer Hatzair. After high school, Zygier began a law degree at Monash University before announcing to family and friends that he was taking some time out to live in Israel, where he ended up at Kibbutz Gazit.

About 500 people currently live at Kibbutz Gazit – which is in the north of the country, in the hills surrounding the Sea of Galilee close to Israel's border with Lebanon – and they include 40-year-old Daniel Leiton, a tall, strong-looking man with big hands and a thick Australian accent. "Ben was an amazing man," says Leiton, who describes Zygier as one of his best friends. “Cheerful, friendly, warm." Leiton recalls meeting Zygier for the first time in Melbourne in the late 1980s. Even then, says Leiton, the two teenagers shared a passionate belief in Zionism, with Ben already making it clear that he would make Aliyah, the act of immigration for diaspora Jews to the land of Israel. The last time Leiton saw Zygier was in Melbourne, early in the 2010 new year, only weeks before Zygier was arrested. Asked if he noticed Zygier behaving strangely, or whether he seemed tense or anxious, Leiton says no. "He was, as always." Unable to imagine his friend locked up in solitary confinement in the high-security Ayalon prison, even less that he was a Mossad agent, Leiton still finds it difficult to comprehend the fact of Zygier's suicide. "Unbelievable," he murmurs.

Another friend of Zygier's was Lior Brand, who shared a living space with both Zygier and Leiton at Kibbutz Gazit, and who describes Zygier as "obviously clever, and ready to defend Israel against its enemies, no matter what the cost". After living at Kibbutz Gazit, and formally taking Israeli citizenship under the adopted Hebrew name of Ben Alon, Zygier flitted back and forth between Israel and Australia, in turn completing his law degree at Monash, and completing his military service in Israel. In this tiny strip of a nation surrounded only by countries either overtly or surreptitiously hostile to its existence, one agency in particular stands ready to accept such people into its ranks: the Institute for Intelligence and Special Operations, known the world over by the Hebrew word for "institute" as the Mossad. Engaged in a furious shadow war against its enemies, Mossad's most recent exploits include the car-bomb assassination of Hezbollah commander Imad Mughniyeh in 2008, the January 2010 killing of Hamas operative Mahmoud Al-Mabhouh and at least five Iranian nuclear scientists in Dubai. Always on the look out for Israel's best and brightest talent, at the beginning of the last decade Mossad began its first-ever public recruitment drive complete with advertisements promoting "the job of a lifetime".

“The Mossad is open – not for everyone, but for a few. Maybe for you," said the tagline. The advertisements caught Zygier's eye, and he responded to the Gmail address provided at the bottom of one of the ads. For an agency like Mossad, which depends on its ability to send its agents unsuspected behind enemy lines, foreign-born nationals like Zygier offer an inherently valuable bonus – access to a genuine foreign passport that bears no connection to Israel. At the beginning of 2003, after he had completed an article clerkship at the Melbourne offices of corporate law-firm Deacons (now Norton Rose), Zygier took a leave of absence and moved to Tel Aviv, where he won a trainee position at the prestigious Tel Aviv law firm of Herzog, Fox & Ne'eman. In fact, by this time Zygier was already being screened by Mossad and hopefully awaiting news that his application would be successful.

As part of that screening process, candidates are interviewed by psychologists who are looking for obvious flaws or personality traits that might disqualify them from a career in a clandestine intelligence service. "We're looking for mentally stable people," says one Israeli psychiatrist who is familiar with the recruitment process. By December 2003, Zygier had received the good news he was hoping for, and was formally accepted to undergo an intense year-long training program that included mastering such techniques as how to falsify resumés and other documents, as well as how to manipulate people. By early 2005 he was ready for his first mission. He was sent to Europe, where he was instructed to infiltrate companies that had business relationships with countries including Iran and Syria. One company Zygier had contact with was a hi-tech firm in Milan, Italy. Despite initial information provided to Fairfax Media that this company might be a front company owned and operated by Mossad, subsequent investigations have determined conclusively that this is not the case.

According to Israeli intelligence sources, Zygier also chased other opportunities in Eastern Europe and the Balkans. One chief executive of a mid-sized European company with extensive business interests across the Middle East and Persian Gulf – including Iran – confirmed that he had hired Zygier for an accounting position. The CEO described Zygier as being "extremely sharp", and said that while it became obvious that Zygier was not trained in accounting despite his claims, he nevertheless managed to master the requisite skills quickly. But, having mastered the job and usually being able to finish a full day's work by as early as 11am, Zygier then started to lose interest in his regular work duties. Because of Zygier's evident talent, a decision was then made to reassign him to another role within the company that focused on customer relations.

A similar pattern repeated itself. Zygier initially thrived in the new role, but then began to lose interest to the extent that it started to adversely affect customer relations. The CEO said Zygier began behaving rashly with clients, finally causing one major client to sever its links with his company. Despite his intelligence, the CEO said Zygier displayed a lack of commitment to the tasks he was assigned to within his company. "So, we had to let him go," he said. When confronted with the news that Zygier was actually a full-time employee of Mossad, the CEO said he had struggled to process the news that his company – a legitimate concern that he had built largely on his own – would have been targeted by Israeli intelligence.

The CEO said that while his company had significant business interests across the Middle East, Zygier never travelled as part of his job and had no face-to-face contact with clients. He said that never at any stage during the 18 months that he employed Zygier were any suspicions raised that Zygier was the clandestine figure he later proved to be. He said he also remained unsure what advantage, if any, Zygier would have been able to gain on behalf of Israel while working for his company. By mid 2007, Zygier had, in the eyes of his superiors, performed without much success. He couldn't deliver, at least not enough of what Mossad wanted, so a decision was made to bring a reluctant Zygier back from the field to a desk job. He was "neither particularly bad nor particularly good, but mediocre," says an Israeli source familiar with Zygier's case.

Inside Mossad's hexagonal headquarters off Tel Aviv's highway No.5, the agency is divided into three main sections. Keshet, which means rainbow in Hebrew, is the first section, and is responsible for surveillance and other forms of covert intelligence gathering. The Caesarea department, which is named after the nearby ancient Roman settlement, is home to Mossad strike force, the men and women who prepare and execute attacks abroad. The largest section is called Tsomet, which is the Hebrew word for crossroads, a more bureaucratic, less glamorous section that deals mainly with the evaluation and analysis of the information coming in. For someone like Zygier, this must have been a blow to his self-esteem, with former Mossad insiders describing the work for Tsomet as bureaucratic, complete with routines and supervision that an agent can break free from when working abroad.

Over recent decades, say Mossad insiders, organisational changes within Tsomet have meant that the once strictly segregated, smaller units have been merged into larger teams, with the information being handled across the section becoming more visible to the people working there. Yet, as subsequent events indicated, this concept of transparency within had a fundamental flaw: giving Tsomet employees like Zygier access to so much information actually makes them vulnerable to betrayal. During the early hours of Saturday, May 16, 2009, Lebanese special forces stormed the house of Ziad al-Homsi in the village of Saadnayel in the western Bekaa Valley, dragging the startled 61-year-old from his bed. According to the arrest warrant, Homsi was accused of being an Israeli spy. The warrant even stated his Mossad codename: The Indian. The arrest came as a shock to many Lebanese, not just because Homsi had been the mayor of his town for years. He was also treated as a war hero, because he had fought against Israel on the side of the Palestine Liberation Organisation and the Syrian army during the Lebanese civil war.

But, as his friends and family were to soon learn, Homsi had been recruited to work as a spy for Israel since 2006, receiving about $US100,000 for his services. Leaked details from Homsi's interrogation underscore how important he was to Mossad, with Homsi revealing that he had told his Israeli handlers that he could lead them to Hassan Nasrallah, the leader of Israel's mortal enemy, Hezbollah, who has lived in hiding for years, paving the way for another assassination. The indictment against Homsi revealed the elaborate lengths to which Mossad went to recruit Homsi. According to Homsi, a Chinese man named "David" had apparently come to his village in Lebanon, introducing himself to Homsi as an employee of the City of Beijing's foreign trade office, and claiming that he wanted to establish business ties in Lebanon. At a meeting in Lebanon, "David" invited Homsi to Beijing to attend a trade fair, telling him that the invitation had come directly from the Chinese government. Homsi enjoyed a successful visit to Beijing where he was promised a salary.

Later, he was invited to another meeting abroad, this time in Bangkok, but instead of business, the people on the other side of the table started asking Homsi what he knew about three Israeli soldiers who had been missing since a 1982 battle that Homsi himself had fought in on the side of the Arabs. "This is the moment at which the defendant becomes aware that he is dealing with Israelis, who work for the Mossad and have nothing to do with import-export companies or services that search for missing people," reads the Homsi indictment. Homsi agreed to work for Mossad who provided him with a computer and a doctored USB flash drive, as well as a device that looked like a stereo system but was in fact a transmitter for sending messages, all of which were seized after his arrest. Homsi, says General Ashraf Rifi, the head of Lebanese intelligence, was one of the most important catches his agency had ever made. Homsi was later sentenced to 15 years in prison with hard labor. The spring of 2009 was a busy time for Lebanese intelligence, who managed to crack open several Israeli spy rings.

Another of those arrested was Mustafa Ali Awadeh, code name "Zuzi," another important mole within Hezbollah. For the Israelis, it was the biggest intelligence setback in the Levant in decades. Officials at Mossad headquarters were baffled. How did the Lebanese manage to track down these men? An even greater stir was created at Mossad headquarters when it received a tip that there had been talk within Hezbollah about a Mossad agent who was currently in Australia, who may be in some danger. It was soon clear that the agent had to be Ben Zygier. Zygier, frustrated by his desk job, had requested leave of absence to do a masters of management at Monash University. The Mossad personnel department approved the request and by the beginning of 2009, Zygier had enrolled under the name of Benjamin Allen and was back living in Melbourne. He told a fellow student that he had worked for the PricewaterhouseCoopers management-consulting firm in Geneva, and that he occasionally had to return to Switzerland for the firm. It explained his many trips.

"Ben was obsessed with the notion of keeping fit," a former fellow student recalls. "He always ate well and paid attention to his health." In October, 2009, Fairfax Media received a tip from an Australian source about three dual Australian-Israeli citizens who were suspected of working on behalf of Israeli intelligence, using their Australian identities as cover. One of the names was that of Ben Zygier, but when Fairfax Media confronted Zygier with the allegations during December 2009 and January 2010, Zygier vociferously denied any such thing, dismissing the information as fanciful. In early January, 2010, Zygier's Mossad superiors decided to call Zygier back to Tel Aviv, not because they yet suspected him of leaking information to the Lebanese, but out of concern for his safety stemming from the tip that Hezbollah appeared to know his identity. Zygier's superiors had also received reports that Zygier had breached protocol by talking openly about the fact that he was a Mossad agent, and wanted to warn him to be more discreet.

It was not until Zygier was back in Israel, where it was thought that there was something odd about his behaviour, the suspicion arose that he might have had a role in the arrests in Lebanon. By January 29, 2010, that suspicion was sufficient to order Israel's General Security Service, better known by its two-letter Hebrew abbreviation as the Shin Bet, arrested Zygier. The story they uncovered during the internal investigation that followed shocked them. Zygier, apparently frustrated by his demotion to a desk job, had decided to take matters into his own hands and find a way to rehabilitate his reputation within the organisation. Under intense questioning from the Shin Bet, Zygier broke down and admitted that sometime in 2008, before he took his leave of absence and moved to Australia, he had flown to eastern Europe to meet with a man he knew to have close links with Hezbollah with the intention of turning that person into a double agent. Instead, the man reported the recruitment attempt to Beirut, and himself began playing the same game as Zygier, except in reverse. Without Zygier's knowledge, the man was reporting every detail of his contact with Zygier back to the Hezbollah leadership in Beirut. Israeli officials believe that even Nasrallah himself was being kept informed.

The contact between Zygier and his Hezbollah-affiliated contact went on for months. When the man asked Zygier for proof that he was a real Mossad agent, Zygier readily complied and began supplying him with real intelligence from Tel Aviv, including the names of Ziad al-Homsi and Mustafa Ali Awadeh, Mossad's two top informants in Lebanon. Israeli officials with access to the investigation say that when Zygier was arrested, he was also found carrying a compact disc with additional classified information from the Tsomet department, which they believe he was also preparing to hand over to the other side. At a meeting in Tel Aviv, earlier this month, a black limousine with darkened windows drove into a public parking lot, bringing a reporter to a meeting with an Israeli government official. "Zygier wanted to achieve something that he didn't end up getting," says the official, who is familiar with the investigation. "And then he ended up on a precipitous path. He crossed paths with someone who was much more professional than he was."

At some point, he says, Zygier crossed a red line and went to the dark side. His fate, the official points out, was largely a matter of psychology. Israeli informants have certainly changed sides in the past. But a regular Mossad employee has never done what Zygier did. It is a bitter defeat for Mossad, but for Hezbollah it is one of the rare instances in which an Arab intelligence service prevailed over its Jewish counterpart. Zygier's actions are also a heavy blow to Mossad because they raise doubts as to the integrity of the agency's own people – and the manner in which it recruits employees. Lior Brand, one of Zygier's friends from Kibbutz Gazit, believes that Zygier simply wasn't up to the task. The lies, the silence and the loneliness were too much for him, says Brand, adding that Mossad "made a big mistake" by recruiting him. He says that he will never forgive Mossad for recruiting the wrong person.

Negotiations over Zygier's sentence were conducted behind the scenes in December 2010. Mossad and Shin Bet wanted to set an example and demanded that the traitor spend at least 10 years in prison. While he was in prison, in the summer of 2010, Zygier's second daughter was born, and the family was permitted to visit him occasionally. What truly motivated Zygier? Was it wounded pride? Vanity? A lack of professionalism? Perhaps his parents could answer these questions, but they have chosen to remain silent. What can be ruled out conclusively is that money played no role. After Israeli security officials had released Zygier's body, the family invited his closest friends to the funeral, including Daniel Leiton from Kibbutz Gazit. Leiton went to the cemetery and asked why Zygier had to die, but he didn't receive an answer. "No one talked about why, at 34, he suddenly died."

Leiton says that while he still loves Israel, something went terribly wrong in this case. Loading Correction: The original version of this story incorrectly said there was an inscription on Ben Zygier's tombstone saying "Blessed be the judge of truth". * Support is available for anyone who may be distressed by calling Lifeline 131 114, Mensline 1300 789 978, Kids Helpline 1800 551 800.