About six weeks ago, we covered the growing problem of AI-generated tracks masquerading as human-created music flooding Spotify. Now, one of the perpetrators has been arrested and charged with orchestrating a massive music streaming fraud scheme, allegedly generating over $10 million in royalties through the use of artificial intelligence and automated bots.
Michael Smith, 52, a North Carolina musician, is accused of creating hundreds of thousands of AI-generated songs and deploying fake accounts to stream these tracks billions of times on platforms such as Spotify, Apple Music, and Amazon Music. The U.S. Department of Justice announced the indictment on September 4, highlighting the severity of Smith's actions, which included wire fraud conspiracy and money laundering conspiracy. If convicted, he could face decades in prison.
The indictment details how Smith's scheme unfolded. Initially, he attempted to defraud streaming services using a small catalog of his own music. However, realizing this was insufficient, he turned to AI technology in 2018 to produce a vast number of songs. Collaborating with the CEO of an undisclosed AI music company, Smith was able to generate thousands of tracks each month. An email from Smith in 2017 indicated that he could generate up to 661,440 streams daily, leading annual royalty payments of $1,207,128 from the streaming platforms.
Smith's fraudulent activities not only defrauded streaming platforms but also undermined the livelihoods of legitimate artists.
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. Today, thanks to the work of the FBI and the career prosecutors of this Office, it’s time for Smith to face the music."
Streaming platforms are now under increased pressure to improve their fraud detection systems and ensure that artists are fairly compensated for their work. The outcome of Smith's case could set a precedent for how the industry addresses the challenges posed by AI-generated content and streaming fraud.
