When I try to execute/run any programs, Windows XP gives me the Access Denied or file not found message.

I can't run any virus utility from it either. when I try to do so, it gives me the same message.

This must be a well known malware or a virus for anyone who's encountered it before, so hoping someone can offer me the exact way of dealing with this issue.

Thanks in advance.

First I'd try to boot to safemode and run a check for virus' there. It sounds like a type of ransome ware to me and and should not be to hard to remove.