You are correct - “pretending” is an intransitive verb here. I’d say that “otherwise” was a pro-form (probably a pro-clause) referring to something mentioned earlier in the discourse. You might imagine it to be something like “He caused the accident, and it’s no good pretending otherwise”, where "otherwise" is interpreted as "He didn’t cause the accident".
New words, one handy idiom, and a 2-minute quiz — delivered to your inbox to keep your streak alive.