The spies were thought to be attempting to place the tracking device, disguised as a rock, off the Philippine island of Luzon back in 2008 in a bid to track the Chinese military in the highly contested region.
The mission came five years before Beijing began building military bunkers on some of the atolls in the region, which has caused recent tensions with the US.
Experienced scuba divers Stephen Stanek and Michael Perich were set to complete the mission.
Group leader Mr Stanek was an operative with the CIA’s paramilitary special activities centre and had served as a navy ordnance disposal diver.
Mr Perich was a recent graduate from the US Merchant Marine Academy and was recruited to the agency as a paramilitary operative.
The other two officers from a 40-foot vessel were Jamie McCormick and Daniel Meeks.
The officers were tasked with planting the pod off the Philippine coast before heading to Japan.
A few weeks later, they were supposed to collect the tracking device which had been designed to detect and record signals from Chinese warships and other crafts.
According to reports, the mission had no official links to the American government and the group were carrying false papers to back up a story claiming they were hired to take a ship from Malaysia to Japan.
READ MORE: South China Sea: Philippines SAVAGE Beijing territory claims
A former officer told Yahoo News no trace of the team or their vessel was ever found.
Months after the incident, their families were told of their deaths and a ceremony was held at the CIA headquarters in Virginia.
The South China Sea region is a disputed territory where it faces rival ownership claims from China, Vietnam, Brunei, Malaysia, the Philippines and Taiwan.
Relations between the nations has grown increasingly strained due to China’s dominance in the region.
Tensions between the US and Beijing have also reached boiling point in the area with Washington calling out China’s dominance.
US Secretary of State, Mike Pompeo, recently called for the other nations to counter against China in the region.
He tweeted: “The United States’ policy is crystal clear: the South China Sea is not China’s maritime empire.
“If Beijing violates international law and free nations do nothing, history shows the CCP will simply take more territory.
“China Sea disputes must be resolved through international law.”
Despite the US having no sovereign claim in the region, Washington has increased its military presence in a bid to counter China.