Two teenage brothers from Canberra remain behind bars over an alleged social media blackmail scam using Grindr and Facebook.

It is alleged the scam was committed by a group of youths — one of whom told an alleged victim the group were "pedo hunters", according to police.

Four members of the group were arrested last week after a police investigation, prompted by concerns initially raised by the AIDS Action Council.

Constable Stephen Luxmoore told the court police were investigating seven incidents, but many of the alleged victims had refused to make a statement.

He said one of the alleged victims was thought to have taken his own life after being targeted by the group.

Constable Luxmoore said the scheme allegedly involved approaches made on social media platforms like Facebook and Grindr, and also email.

He alleged the group then either went to the target's home, or lured them into a public place.

Constable Luxmoore told the court police believed once contact was made, the group would threaten to expose the online conversations in public, unless money or property was handed over.

He said in one encounter, one of the youths allegedly spat on one of the people contacted, and on several occasions threats referring to paedophilia were allegedly used.

Constable Luxmoore said one of the accused group told an alleged victim: "You've come here to f*** my little brother and he's only 15."

He also said one of the alleged victims was told: "We're the pedo hunters".

One member of the group, who is 16, did not apply for bail on Thursday.

His 18-year-old brother was formally refused bail, over concerns he may interfere with witnesses.

Two other youths were released on bail, on strict conditions amounting to virtual house arrest.

They have been banned from using the internet and contacting each other or the alleged victims.

'No work' done by police while youths in custody, court hears

Four members of the group were remanded in custody last week, to allow police to gather electronic evidence.

But on Thursday, the court heard no work had been done.

Paul Edmunds, who represented one of the young people, said his client should not be detained when police had not met their obligations.

"What the AFP have failed to do borders on contemptuous," he said.

"The fact of the matter is they were given a week and they have done nothing."

Magistrate Margaret Hunter agreed, saying she was in a difficult position.

"I cannot have young people languishing in Bimberi," she said.

"It's not a good place to be."

The prosecution strongly opposed bail, saying they needed more time to gather the evidence and there was a public interest in having the matter properly investigated.

During the course of the hearing, police said a designated officer was now assigned to the case.

But Magistrate Hunter allowed bail for two of the youths, telling one of them the offences attracted a long sentence.

"I am going to trust you not to access any information," she said.

"If you are caught you will go back to Bimberi for a very long time."

The case will be back in court at a later date.