Thousands of Australians have received a "death threat" text, demanding they pay 5,000 Australian dollars ($5,140, £3,311) or face being murdered.
The scale of the scam has surprised the police authorities.
At a press conference in Queensland, Det Supt Brian Hay said: "Do not respond. Delete it immediately and don't panic... because that's what they prey upon."
The fraud is believed to be the work of an organised crime gang.
It directs people to a Yahoo email account which police have now disabled.
Mr Hay told reporters that enquiries were ongoing as to whether the criminals were based in Australia.
Some people had already fallen for the scam, mainly those with little experience of text messaging, he revealed.
He said that the scale of the scam was "unprecedented".
"We've never see this anything like this before - to have so many people contacted at the same time."
"There is an extraordinary amount of Australian consumer data that they are exploiting," he added.
He added that the scam was likely to be the work of organised criminals rather than an individual.