The settlement also includes a suspended judgment of $8.5 million for alleged violations of the FTC Act.
Named in the complaint are Enternet Media, Conspy & Co., Lida Rohbani, Nima Hakimi and Baback Hakimi, all based in California.
Last year, a Los Angeles federal judge froze the operation's assets and ordered it shut down after the FTC filed a complaint.
If consumers declined the free downloaded, the pop-up windows kept reappearing.
When consumers did download the offer for free security, their computers were infected with spyware that interfered with the operation of the computer. The spyware was often difficult or impossible to remove.
The downloads included tracking software that followed consumers' movements around the Internet.
In addition, the software changed consumers' homepage settings and inserted new toolbars into browsers that displayed advertising even when the browsers were not activated.
In a variation on the scheme, the pop-ups offered free music files, cell phone ring tones, photographs, wallpaper and song lyrics. As with the alleged security downloads, consumers instead received spyware.