This doesn't look good at all. Seems like a spyware infection let me research it and I'll get back to you ASAP.
The fake virus alert is a result of a pest called "Smitfraud".
Here is the removal steps until the Antimalware products released new updates for this newest variant out:
1. Print out or save to notepad these instructions as we will need to do most steps offline and in SAFE MODE (so you won't have this window open to see the instruction from)
2. Download SmitfraudFix (by S!Ri) to your Desktop (Win2k/WinXP only!).http://siri.urz.free.fr/Fix/SmitfraudFix.zip
Extract all the files to your Destop. A folder named SmitfraudFix will be created on your Desktop.
3 Download, install, and update Ewido AntiMalware (get the free trial version)http://www.ewido.net/en/download/
a. Install Ewido AntiMalware
b. Launch Ewido, there should be a big yellowE icon on your desktop, double-click it.
c. The program will prompt you to update click the OK button
d. The program will now go to the main screen
e. On the left hand side of the main screen click on Update
f. Click on Start. The update will start and a progress bar will show the updates being installed.
g. Do not scan yet. We'll do that later in SAFE MODE. After updating close Ewido and any open programs.
4. Reboot into Safe Mode
If you're having trouble getting into safe mode or don't know how, here's a handy tool: Bootsafe.exehttp://www.superadblocker.com/bootsafe.html
5. Once in safe mode, start Ewido AntiMalware
a. Click on scanner
b. Click on *complete system scan*
c. Let the program scan the machine.
d. While the scan is in progress you will be prompted to clean the first infected file it finds. Choose Remove, then put a check next to Perform action on all infections in the left corner of the box so you don't have to sit and watch Ewido the whole time.
Checkmark the box: *Create encrypted backup in the quarantine* (recommended)
When the scan finishes, click on "Save Report". This will create a text file. Make sure you know where to find this file again.
6. Open the SmitfraudFix folder and double-click smitfraudfix.cmd
Select option #2 - Clean by typing 2 and press Enter.
Wait for the tool to complete and disk cleanup to finish.
You will be prompted : "Registry cleaning - Do you want to clean the registry ?" answer Yes by typing Y and hit Enter.
The tool will also check if wininet.dll is infected. If a clean version is found, you will be prompted to replace wininet.dll. Answer Yes to the question "Replace infected file ?" by typing Y and hit Enter.
A reboot may be needed to finish the cleaning process, if you computer does not restart automatically please do it yourself manually.
7. Reboot back to normal mode.
8. Get a free online AV scan at Panda's ActiveScan
Let it remove any infected files found, and when it finishes save the log at the end to post back here.
Panda's Active Scanhttp://www.pandasoftware.com/activescan/
Create a HJT log using HiJackThis.exe and post it in the HJT Board NOT here! (Also, including the Ewido scan log might help the HJT Team member in analyzing your log)
This set of instructions was taken from a help post from a lavasoft help member by the name of CalamityJane and modified by myself.
Edited by Elendil, 21 May 2006 - 05:32 PM.