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The Scarecrow has busted out of Arkham and has a new crop of zombie student thugs under his control including the son of Paul Herold, who he killed. Jean Paul Valley, Batman takes down some street thugs and strikes a little more fear into them than Bruce Wayne might. He then rushes off to the university where Bullock and Montoya are gathering information about the Scarecrow. Batman saves them from a booby trapped VHS tape bomb while the Scarecrow readies his plans.
Meanwhile Anarky takes on the Anti-Batz motorcycle gang.
The origin of the Scarecrow is explored, his love of frightening birds and reading books. Eventually he became a psychology professor and decided to take up a life of crime to get cash and show his peers he deserves respect. He carried out a hit on Paul Herold on behalf of a man named Kendrick while Herold's young son watched. His son, now in college is now tortured under Scarecrow's control.
Scarecrow's thugs set off fear gas into ventilation systems around the city, setting off widespread panic. Anarky takes down one of the Scarecrows and snaps him out of his spell while Batman deals with crowd control. Scarecrow creates a giant projection of himself in the Gotham sky proclaiming himself the city's new god of fear.