The police arrested a gang for counterfeiting luxury watches and selling them online.

counterfeiting 是动词 counterfeit 的现在分词形式。counterfeit 由前缀 counter-（表示"相反的、对抗的"）和词根 feit（来自拉丁语 facere，意为"做"）组成，字面意思是"做假"，即"伪造、仿造"的意思。counterfeiting 在这里指"伪造（奢侈品）"的行为。