A North Carolina musician faces decades in prison for allegedly masterminding the first criminal scheme using artificial intelligence to defraud music streaming platforms of over $10 million in royalties. Federal prosecutors unsealed indictments on September 4, 2024, charging Michael Smith, 52, with wire fraud conspiracy, wire fraud, and money laundering conspiracy, each carrying up to 20 years imprisonment.
The Mechanics of Deception
According to the U.S. Attorney’s Office for the Southern District of New York, Smith’s operation (2017-2024) exploited royalty systems at Amazon Music, Apple Music, Spotify, and YouTube Music. He allegedly created thousands of bot accounts programmed to continuously stream AI-generated songs he controlled. At its peak, the scheme generated approximately 661,440 daily streams, projecting $1.2 million in annual royalties.
To evade detection, Smith distributed streams across hundreds of thousands of tracks, each played modestly to avoid triggering fraud algorithms. “We need a TON of songs fast to make this work around anti-fraud policies,” he wrote in a 2018 email cited in court documents. For content, he partnered with an AI music company CEO (“CC-3”) who supplied thousands of weekly tracks described as “instant music”. The songs bore procedurally generated titles like “Zymoplastic” and artist pseudonyms such as “Calm Baseball” names designed to mimic legitimate catalogues.
Industry-Wide Ripples
The case exposes systemic vulnerabilities as AI floods streaming platforms. Deezer reports AI-generated tracks now constitute 18% of daily uploads (20,000 songs), with up to 70% of streams on such content deemed fraudulent. This “fraud-as-a-service” model diverts an estimated $2 billion annually from legitimate artists, according to detection firm Beatdapp.
David Sandler, Warner Music’s VP of Global Content Protection, notes the collateral damage: “Every dollar we spend fighting fraud is a dollar we can’t spend discovering new artists”. Streaming platforms face mounting pressure; Spotify confirmed it withheld approximately $60,000 of Smith’s royalties after flagging irregularities, representing just 0.6% of his alleged total haul.
Enforcement and Innovation
The FBI’s investigation revealed that Smith used offshore labor to manage accounts and fake debit cards to fund subscriptions. U.S. Attorney Damian Williams emphasized the human toll: “Smith stole millions in royalties that should have been paid to musicians, songwriters, and other rights holders”.
Platforms are responding with countermeasures. Deezer now deploys AI-detection tools to block royalties on fraudulent streams and caps per-account royalty eligibility at 1,000 plays. Industry alliances like the Music Fights Fraud Alliance have also formed to share data and tactics.
Broader Implications
Smith pleaded not guilty in September 2024, with trial proceedings ongoing. His case sets a precedent as generative AI complicates copyright enforcement. Thibault Roucou, Deezer’s Royalties Director, cautions: “As long as there is money in fraudulent streaming, there will be efforts to profit”.
The outcome could reshape how platforms handle AI content and determine whether human creativity remains economically viable in the algorithmic age.
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