Fake AV is a form of malware that masquerades as an anti-virus application running on your system.
You can pick up Fake AV when you accidentally browse to malicious websites that host the malware. When Fake AV executes, either in your browser or as a regular application, it pretends to run a malware scan on your system and displays a report of the malware it claims to have found. However, no scans are actually performed and the list of “discovered” malware is fictitious.
The Fake AV then redirects you to another malicious website where you are coerced to pay for it by entering your credit card number and possibly other personal information. At this point the bad guys can charge your credit account at will until you notice this illegal activity and call your credit card company to close your account.
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