North Carolina Musician Charged With AI Assisted Music Streaming Fraud 

Michael Smith has been arrested for allegedly generating over $10 million in royalties through streaming fraud aided by AI

In the first criminal case involving artificially inflated streaming, Damian Williams, the U.S. Attorney for the Southern District of New York, and Christie M. Curtis, the Acting Assistant Director in Charge of the New York Field Office of the FBI, recently announced the unsealing of a three-count criminal indictment charging Michael Smith.

Smith, also a musician, allegedly gained over $10 million in royalty payments unlawfully through his scheme of creating hundreds of thousands of songs with artificial intelligence (AI) and using automated “bot” programs to stream the AI-generated songs billions of times.  

The 52-year-old of Cornelius, North Carolina, has since been arrested and will be presented before a U.S. Magistrate Judge in North Carolina.

Smith is currently charged with a supposed wire fraud conspiracy, wire fraud, and money laundering conspiracy. All three sentences carry a maximum sentence of 20 years in prison. However, the judge will determine any final sentencing of the defendant.

Allegedly, Smith created thousands of accounts on the Streaming Platforms (the “Bot Accounts”) that he could use to stream songs, and used software to cause the Bot Accounts to continuously stream those that he owned. 

This process generated around 661,440 streams each day, yielding annual royalties of $1,207,128. To avoid suspicion, Smith reportedly automated streams across thousands of songs to bypass abnormal streaming to any one track.  

To generate the high amount of songs needed for facilitating the fraud scheme, he is allegedly said to have enlisted two co-conspirators in 2018, telling them that they needed “to get a TON of songs fast to make this work around the anti-fraud policies these guys are all using now,” as reported by The U.S. Department of Justice.

Smith eventually turned to AI, working allegedly with the CEO of an unidentified AI music company and music promoter to create more songs to fraudulently stream. 

He randomly generated song and artist names for audio files so they would appear to be created by real artists rather than AI, and caused Streaming Platforms to falsely report billions of streams of his music. 

As written in RIAA’s 2024 Mid-Year Music Industry Revenue Report, streaming subscriptions in the U.S. were up 3% to 99 million over the first half of 2024, and that streaming services grew 4% at retail value to a record of $7.3 billion.

According to Variety, Smith denied engaging in streaming fraud when confronted by the Mechanical Licensing Collective (MLC), which distributes streaming royalties — in 2023, the MLC had raised doubts about how he could generate so much music so quickly without using AI. 

Led by Assistant U.S. Attorneys Nicholas W. Chiuchiolo and Kevin Mead, this case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Charges in the indictment stand as accusations — accordingly, the defendant is presumed innocent unless and until proven guilty.

“As alleged … 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,” Williams said in a statement. “Today, thanks to the work of the FBI and the career prosecutors of this Office, it’s time for Smith to face the music.”

“The defendant’s alleged scheme played upon the integrity of the music industry by a concerted attempt to circumvent the streaming platforms’ policies,” Curtis added. “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.”

As reported in The New York Times, Smith responded to his charges with denial: “This is absolutely wrong and crazy!” he said. “There is absolutely no fraud going on whatsoever! How can I appeal this?”