A North Carolina man was charged by federal authorities with music streaming fraud.
The U.S. Department of Justice alleges Michael Smith of Cornelius created thousands of fake accounts, or Bot Accounts, which would then stream songs he created with artificial intelligence in order to generate royalty revenue from streaming platforms like Spotify and Apple Music.
At one point, Smith had created a network of bots that was streaming more than 660,000 songs per day, generating more than $1.2 million in annual royalties. All told, he reaped unlawful royalties of around $10 million, according to the DOJ indictment.
"Michael Smith fraudulently streamed songs created with artificial intelligence billions of times in order to steal royalties," U.S. Attorney Damian Williams said in a statement unsealing the indictment. "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."
Streaming platforms have systems in place to detect fraudulent streaming. If one particular song is streamed all of a sudden at a high level, it could raise red flags. So to avoid detection, Smith created thousands of songs using AI so that each of the bot accounts would stream a fake song only a handful of times.
Smith began working with the chief executive of an AI music company that ultimately provided him with hundreds of thousands of AI-generated songs. In a 2019 email, Smith allegedly wrote that CEO: "Keep in mind what we're doing musically here ... this is not 'music,' it's 'instant music' ;)."
The 52-year-old is charged with wire fraud conspiracy, which carries a maximum sentence of 20 years in prison; wire fraud, which carries a maximum sentence of 20 years in prison; and money laundering conspiracy, which carries a maximum sentence of 20 years in prison, according to the DOJ.
