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A proxy Trojan is a virus which hijacks and turns the host computer into a proxy server, part of a botnet, from which an attacker can stage anonymous activities and attacks.
The whole point of a proxy Trojan is to hide the attacker, making it harder to trace the true origin of an attack since the attacks will look like they are coming from random and multiple directions because of the proxy bots.
A proxy Trojan, as the name suggests, is a kind of Trojan malware which creates proxy servers out of infected computers for staging anonymous attacks.
Like all Trojans, the proxy is spread disguised as legitimate software downloads and attachments or piggy-backing on legitimate downloads and attachments.
This Trojan gives the attacker a lot of opportunity to do malicious activities such as credit card fraud, hacking and other illegal activities since it masks the true location of the attacker.
Aside from that, it can collect information from the host computer and send it to the attacker.