Two senior Australian sailors are being investigated as part of a massive US Navy bribery scandal involving prostitutes and wild parties, and could eventually face prosecution under the American military justice system.

Key points: Two Australians, one of them a lieutenant-commander, are being investigated

Two Australians, one of them a lieutenant-commander, are being investigated US officials are accused of using ports run by "Fat Leonard" in return for prostitution services

US officials are accused of using ports run by "Fat Leonard" in return for prostitution services "Fat Leonard" is Leonard Francis, a Malaysian-based defence contractor

Nine high-ranking US Navy officers, including an Admiral, have been charged with trading classified information in exchange for travel, dinner and prostitution services from a foreign defence contractor, nicknamed Fat Leonard.

According to the US Justice Department, a member of the Royal Australian Navy, known only as "AG", has been implicated in the affair.

The ABC has confirmed the now retired sailor held the rank of Lieutenant-Commander in the RAN, and the second man being investigated shared a similar rank.

From November 2007 to January 2010 AG was seconded to the US Navy as the Royal Australian Navy liaison officer to the Seventh Fleet.

As the Liaison Officer, AG served aboard the USS Blue Ridge alongside his US Navy counterparts, planning joint operations and exercises between the United States and Australia.

Defence Minister Marise Payne had earlier refused to say how many Australian sailors may be under investigation as part of the widening scandal, but said Australia was cooperating with the probe.

"This is an investigation in relation to certain activities surrounding the Seventh Fleet," she said.

"It is an ongoing investigation so I won't make any detailed comment on that, but we've been working with the United States on this since the second half of last year."

The Australian Federal Police said it was aware of the investigation by the US Defence Criminal Investigative Service and said it was working in conjunction with it and the Australian Department of Defence to investigate any Australian involvement in the matter.

In what has been dubbed the "Fat Leonard" scandal, US officials are accused of taking bribes in return for sharing information on ship movements and sending ships to ports run by the Malaysian-based defence contractor, whose real name is Leonard Francis.

Part of a US Justice Dept statement referencing an Australian sailor in the Fat Leonard scandal.

Francis's company was contracted to clean, stock and refuel the Navy ships.

In 2015, Francis and the company pleaded guilty to bribing Navy officials over 10 years, while billing the Navy $200 million for work in half a dozen ports, according to court documents.

As part of his guilty plea, Francis agreed to pay $35 million in restitution and cooperate with federal prosecutors in the probe.

Prosecutors claim that in 2007, Francis hosted a "raging multi-day party, with a rotating carousel of prostitutes in attendance, during which the conspirators drank all of the Perignon [champagne] available at the Shangri-La [hotel]", running up a $50,000 bill.

Twenty-five people have been indicted in the case, including two of Francis's employees and a Naval Criminal Investigative Service agent, who prosecutors say kept Francis informed about the investigation.

The Defence Minister has refused to say whether Australia would allow the men to be extradited if they are charged by Federal Police, but the ABC understands that option could be available to the Federal Attorney-General under a Memorandum of Understanding with the United States.