A North Carolina man has officially pleaded guilty to orchestrating a massive wire fraud scheme that siphoned over $8 million in royalties from global music streaming services. By utilizing artificial intelligence to mass-produce tracks and deploying automated bots to stream them billions of times, Michael Smith successfully diverted funds away from legitimate artists.
The 54-year-old resident of Cornelius admitted to one count of conspiracy to commit wire fraud. He is currently awaiting sentencing in July, where he faces a maximum penalty of five years in federal prison. As part of his plea agreement, Michael Smith is also required to pay back the exact sum of $8,091,843.64 that he fraudulently collected.
Detailing the mechanics of the digital heist, an official statement published on the Department of Justice website outlined how the automated scheme directly impacted the income of hard-working creators.
“Music can be streamed through music streaming platforms such as Amazon Music, Apple Music, Spotify, and YouTube Music (the ‘Streaming Platforms’). Each time a song is streamed through one of the Streaming Platforms, the songwriter who composed the song, the musician who performed it, and in certain cases other rights holders, are entitled to small royalty payments.”
“Royalty payments are made proportionately to musicians and songwriters from a pool of funds. As a result, streaming fraud diverts funds from musicians and songwriters whose songs were legitimately streamed by real consumers to those who use automation to falsely create the appearance of legitimate streaming.”
Addressing the unprecedented scale of the digital theft, US Attorney Jay Clayton issued a stern statement condemning the deceptive operation and its financial toll on the industry.
“Michael Smith generated thousands of fake songs using artificial intelligence and then streamed those fake songs billions of times,” Clayton stated.
“Although the songs and listeners were fake, the millions of dollars Smith stole was real. Millions of dollars in royalties that Smith diverted from real, deserving artists and rights holders. Smith’s brazen scheme is over, as he stands convicted of a federal crime for his AI-assisted fraud.”
This landmark case highlights a rapidly growing issue within the modern music business. According to data reported by Billboard, the AI music generator platform Suno currently produces approximately seven million artificial tracks every single day. Similarly, The Guardian recently noted that the streaming service Deezer receives around 60,000 fully machine-generated uploads daily.
