Antivirus 'Scareware' is Lucrative

Turns out an infamous pop-up aimed at spooking users into downloading a phony anti-virus program does detect a little malware, but only as a cover for what it really does -- make big bucks for its developers and distributors. According to new research conducted by SecureWorks director of malware research Joe Stewart, who recently dissected the infamous software program and its money trail, affiliates who sell the so-called Antivirus XP 2008 (and now 2009) get a 58 to 90 percent commission on sales of the around $50 package.

The program infects Web sites with phony pop-ups warning users that their machine is infected and to download the "anti-virus" software.

Stewart also discovered that, surprisingly, the fraudulent Antivirus XP 2008 software does actually contain some anti-malware functions, but only to make it appear legitimate. While the software claims to detect more than 100,000 known viruses, it really only catches and removes 17 minor ones, including former versions of the software itself, Stewart says. "Some are cookies, not really malware," he says. "I was surprised that it has some functionality."

While only about 2 percent of users actually fall for the fake AV software, the fraudulent software is still lucrative to the spammers and other bad guys who sell it on behalf of its developer, Bakasoftware of Russia. Stewart infiltrated Bakasoftware's distribution program and found that a handful of the top "affiliates" who sell the software could potentially make as much as $5 million a year. He found a Bakasoftware listing of what its distributors, or affiliates, make: One affiliate who successfully installed 154,825 copies of AV XP 2008 in 10 days but sold only 2,772 of them still earned him $146,525.

"At that rate, the affiliate could be expected to earn over 5 million U.S. dollars a year, simply by maintaining a large botnet and forcing AV XP 08 installs on 10,000 to 20,000 computers a day," Stewart wrote in his report.

Affiliates are typically individuals, many who run botnets, he says. "They know how to buy and sell, and just need to line up as many sponsor programs as they can to cash in on that. This [AV software] is one of those programs," Stewart says.

So what exactly does the software do to the machines that install it? Mostly it spoofs the way most AV programs work, Stewart says, and does not infect the machine per se. "It's possible it could install other code because it has an update feature," he says. "But you have the ability to turn it off and tell it not to run."

In some cases, however, AV XP 2008/09 affiliates have downloaded malware along with their software on victims' computers. SecureWorks has seen password stealers and other Trojans stuffed onto victims' machines as well.

The attackers begin the process by inserting their adware pop-ups in Web sites via ActiveX, Flash, and other third-party plug-ins, Stewart says.

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