Fugazi(Sometimes spelled Fugazy) is often used as a slang term that means fake, phony. The term is often used to refer to someone who may act though, but in reality is just playing the part and if confronted will cower in fear. This word is believed to have been an Italian slang which made its way in the US.
This word is often used in rap songs to describe individuals who are claiming to be gangsters but don’t really live the gangster life, and also to describe items that are fake. In Future’s song ‘Magic’ he says “Excuse me but my lingo crazy - See these diamonds ain't none of 'em fugazi”, Future is saying his diamonds are real and not fake(fugazi). In SD’s song “Re-Up” he says “And You Fugazy Ass N*ggas Your Whole Squad Want To Be Me”, SD is saying that those fake guys’ squad want to be him.
Rapper Fredo Santana has a song out titled “Fugazy”, the word here is spelled a little different than it normally is, but it means the same thing(fake). In the song, Fredo Santana says “You Ain't A Real N*gga, You Fugazy - Got Damn You So Fugazy - Your Whole Clique Fugazy - Stop Lying Boy You Fugazy”, Fredo is saying the dude is not a real gangster, he’s fake(fugazy).
Apart from the above definition, Fugazi is also a military slang which is used to describe any situation that is really messed such as someone stepping on a grenade; this military slang became famous during the Vietnam war which had many messed up stories.