State and federal police are currently raiding the inner-city brothel Stiletto, owned by gambling identity Eddie Hayson.
It's understood Mr Hayson is on the premises, as detectives attached to a joint operation codenamed Polaris conduct their inquiries.
One worker told Fairfax Media that about 15 detectives were inside and the venue had been "locked down".
Another worker, who asked to be identified only as Susan, said she had stopped working there at night because "too much nasty shit was going on".
Susan said she had seen Mr Hayson over the past week or so.
"He pops in and out, he'd been away for a while but he's been back [recently]," she said.
A man who gave his name as Matt, who was working nearby, said NSW Riot Squad police were let in by staff.
"Police were let in, there was no need to barge in," he said. "I saw sniffer dogs come out and plain-clothes police wearing gloves leave too," he said.
Both police forces would only say "operational activity" was under way in Camperdown.
"The AFP and the NSW Police are currently undertaking operational activity ... as this relates to an ongoing investigation it is not appropriate to comment further," a NSW Police spokeswoman told Fairfax Media.
Riot and dog squads are on scene, along with general duties police and detectives.
A woman who answered the phone at Stiletto said she had "no comment whatsoever" on the raid.
Operation Polaris is a multi-agency task force commissioned to combat organised crime on the waterfront in NSW.
It involves the services of the Australian Federal Police, the NSW Police, and Customs and Border Protection.
MORE TO COME
Fairfax Media crime reporters