Of course he had known about the mermaids.
The Wraith trusted him by then. Mostly, anyway.
Christopher was the most valuable asset the Wraith had, even more than Mordecai, spy and dream-walker, was. The Wraith was hardly going to let the boy gallivant around the worlds without briefing Mordecai on who and what they would encounter and what they were to do.
And Mordecai was responsible for the boy. He tried his best to keep him safe. That disaster in Asheth's temple had been quite enough; he did try to find out what they would face so he could plan for it.
He had known very well what those fishy-smelling packages contained, and his stomach had turned for more reason than the strong smell.
But when Christopher asked him if he'd known, forsaken or betrayed by mother, father, uncle, wide eyes desperate and hopeful and beseeching, and he couldn't say it. He couldn't shatter the light in Christopher's eyes. He couldn't be yet another person in Christopher's life to have betrayed him.
So he lied. It was hardly the worst thing he'd done.