Feds: North Carolina Musician Ran $10 Million Streaming Fraud Using AI-Generated Songs

Federal prosecutors have charged a North Carolina musician with wire fraud and money laundering for allegedly using bot accounts and hundreds of thousands of AI-generated songs to fraudulently earn over $10 million in royalties from streaming services like Spotify and Apple Music.

Rolling Stone reports that the U.S. Attorney’s Office for the Southern District of New York has indicted Michael Smith, a 52-year-old musician from North Carolina, for allegedly running a complex music streaming manipulation scheme. According to the indictment, Smith used bot accounts and hundreds of thousands of AI-generated songs to fraudulently profit from billions of streams, earning more than $10 million in royalty payments from major streaming services over the past seven years.

Smith faces charges of wire fraud conspiracy, wire fraud, and money laundering conspiracy, which could result in a combined maximum sentence of 60 years in prison if convicted. U.S. Attorney Damian Williams stated, “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.”

The indictment alleges that Smith obtained thousands of email accounts through bulk account vendors, at one point having about 10,000 bot accounts on streaming services like Spotify, Apple Music, and Amazon Music. To make the process less labor-intensive, he reportedly paid people in the U.S. and abroad to assist in setting up the accounts. Smith also allegedly purchased family plan accounts as a cheaper way to sign up his bots and used a New York-based service that provides debit cards to employees to make the payments appear more legitimate.

To avoid detection by streaming services, Smith allegedly spread the streams from his bot accounts across thousands of tracks. When his initial strategies of using a publicist’s music catalog and offering to sell streams to artists failed, he turned to artificial intelligence in 2018. Smith allegedly collaborated with an unnamed CEO of an AI music company and a music promoter to create hundreds of thousands of AI-generated songs.

The indictment details several instances where Smith denied any involvement in streaming fraud when confronted by music distribution companies and streaming services. He allegedly lied to the Mechanical Licensing Collective (MLC), claiming that the music was his and not computer-generated. The MLC’s CEO, Kris Ahrend, said the indictment “shines a light on the serious problem of streaming fraud for the music industry” and validates the importance of their efforts to combat fraud and protect songwriters.

Both streaming fraud and AI-generated music have been significant concerns for the music industry in recent years. The major labels worry that streaming fraud diverts royalties away from legitimate artists, while AI songs created with minimal effort can exacerbate these issues. In response, Spotify implemented a new policy at the beginning of the year, requiring at least 1,000 streams before creators can earn revenue on their songs.