Joel Greenberg has told investigators that he and Mr Gaetz had contact with women who were given cash or gifts in return for sex, sources told the New York Times.
The Justice Department investigation is focussed on women who were recruited online and paid for sex, and whether the men had sex with a 17-year-old girl, in violation of sex trafficking laws, people familiar with it told the newspaper.
Mr Gaetz, 38, has defended his past relationships with women and fiercely denied any claims of wrongdoing against him.
The pro-Trump lawmaker has claimed that he is the victim of a politically motivated probe, and been targeted in a $25 million extortion scheme in relation to accusations of sexual misconduct.
Mr Greenberg was indicted last year in a federal sex trafficking case and faces dozens of counts, including sex trafficking a minor, corruption and stalking a political rival.
Speculation about Mr Greenberg’s cooperation with the Justice Department grew last week when his lawyer and a federal prosecutor both said they expected him to plead guilty in the near future.
“I’m sure Matt Gaetz is not feeling very comfortable today,” Mr Greenberg’s lawyer, Fritz Scheller, told reporters after a hearing in the case.
Mr Greenberg, a former Florida tax collector, faces a mandatory minimum of at least 12 years in prison for the charges against him, and is the only person to be charged in the case so far.
Investigators are not just looking at whether Mr Greenberg, Mr Gaetz and others broke sex trafficking laws, but also if Mr Gaetz paid for women over the age of 18 to travel with him.
A spokesperson for Mr Gaetz denied he had done anything wrong.
“Congressman Gaetz has never paid for sex,” said Harlan Hill.
Mr Gaetz has refused to resign from Congress but has faced calls to stand down from the House committee that oversees the Justice Department until the investigation concludes.