It seems like he was indeed feeding them bullshit...Until Tony passed him over for promotion. Up till then, he was keeping the heat off Tony and the crew and passing it to others.

For example, Tony takes over Junior's stolen car ring, and when asked who took it over, Pussy tells the FBI Ray Curto did, even though he knows it was Tony who took it over.

He lied to the FBI and said he hadn't seen Tony yet, when he already had.

He could've easily given up Tony on the Bevilaqua hit, as both a participant and an eyeball witness....He didn't.

He could've given up Chris on the Emil Kolar murder....He didn't.

He could've given Paulie, Chris and Tony up with the Colombian murder...He didn't.