A 52-year-old musician from North Carolina has been arrested and charged with using artificial intelligence to carry out a music streaming fraud scheme that earned him over $10 million in illegal royalties.
Michael Smith allegedly created and streamed AI-generated songs billions of times to trick music platforms like Spotify, Apple Music, and YouTube Music into paying him royalties meant for legitimate artists.
“Michael Smith fraudulently streamed songs created with artificial intelligence billions of times to steal royalties. 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,” said U.S. Attorney Damian Williams.
How the Scheme Worked
The indictment claims that Smith’s fraudulent activities began in 2017 and continued until 2024. During this time, he used AI to create songs and then streamed them on popular platforms like Amazon Music, Apple Music, Spotify, and YouTube Music. He received royalty payments each time one of his AI-generated songs was streamed.
Smith allegedly took his scheme to the next level by creating hundreds of thousands of fake user accounts. He then used these accounts to stream his AI-generated songs up to 661,440 times a day, according to prosecutors. This massive number of fake streams resulted in annual royalty payments exceeding $1.2 million.
To avoid detection, Smith reportedly used fake names to set up the bot accounts and concealed their IP addresses with a virtual private network (VPN).
His actions violated the user agreements of the streaming platforms and amounted to a type of fraud similar to “click fraud,” where online activities are manipulated to generate false ad revenue.
“Tons of Content” Needed
Court documents revealed emails from Smith discussing his plans with co-conspirators. On October 4, 2018, Smith reportedly sent an email explaining that they would need “a ton of content” to avoid detection by the platforms. He continued to push for more content in the following months.
On December 26, 2018, he wrote, “We need to get a TON of songs fast to make this work around the anti-fraud policies these guys are all using now.”
By May 2019, Smith acknowledged the need for a constant supply of new songs to sustain the scheme, stating, “I can’t run the bots without content. And I need enough content so I don’t overrun each song. That’s the problem. If we get too many streams on one song, it comes down.”
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Legal Consequences
Smith is now facing serious legal repercussions. If convicted on charges of wire fraud conspiracy, wire fraud, and money laundering, he could face up to 60 years in prison. The case highlights the growing challenges of regulating AI technology and protecting the integrity of the music industry.
“The defendant’s alleged scheme played upon the integrity of the music industry by a concerted attempt to circumvent the streaming platforms’ policies. The FBI remains dedicated to plucking out those who manipulate advanced technology to receive illicit profits and infringe on the genuine artistic talent of others” said Christie M. Curtis, an FBI Acting Assistant Director.
A Global Issue
Smith’s case is not an isolated incident. Similar schemes have been reported in other parts of the world. In October 2023, a Swedish newspaper, Svenska Dagbladet, reported that criminal gangs in Sweden used AI-generated music to launder money from drug deals, contract killings, and robbery.
“I can say with 100% certainty that this goes on. I have been involved in it myself,” a gang member reportedly said, admitting to using AI-created content for fraudulent purposes.