North Carolina man swindles $10M in AI music scheme

Michael Smith has allegedly defrauded $10 million in royalties by using bot accounts to stream AI-generated songs billions of times on platforms like Spotify, Apple Music, Amazon, and YouTube.

Smith was arrested this week and charged in connection with the scheme to create hundreds of thousands of songs using artificial intelligence (AI), then employ automated programs, known as bots, to stream these songs on major music platforms.

The US Attorney’s Office for the Southern District of New York said the indictment was the “first criminal case involving artificially inflated music streaming.” The scheme dates back to 2017 – well before the current AI boom.

Through this scheme, Smith is alleged to have fraudulently obtained more than $10 million in royalty payments that would have otherwise gone to creators, according to law enforcement.

“Through his brazen fraud scheme, Smith stole millions in royalties that should have been paid to musicians, songwriters, and other rights holders whose songs were legitimately streamed,” US Attorney Damian Williams said.

According to the indictment, 52-years-old Smith, of Cornelius, North Carolina, created thousands of accounts on the streaming platforms and then used bot software to continuously stream songs that he owned.

“At a certain point in the charged time period, Smith estimated that he could use the bot accounts to generate approximately 661,440 streams per day, yielding annual royalties of $1,207,128,” the document read.

It also noted that the suspect had co-conspirators, including an unnamed “chief executive officer of an AI music company” and “a music promoter.”

While a single song streamed one billion times would be flagged as suspicious by streaming platforms, the same amount of fake streams spread across multiple songs was more difficult to detect, allowing the scheme to go on for years.

“The defendant’s alleged scheme played upon the integrity of the music industry by a concerted attempt to circumvent the streaming platforms’ policies,” said FBI Acting Assistant Director Christie M. Curtis.

Smith was charged with wire fraud conspiracy, wire fraud, and money laundering conspiracy, each carrying a maximum sentence of 20 years in prison.