Musician pleads guilty to $8 million streaming royalty fraud scheme using AI-generated songs and bots

North Carolina Musician Admits to Massive AI Music Fraud Scheme

Michael Smith, a 52-year-old musician from Cornelius, North Carolina, has pleaded guilty to conspiracy to commit wire fraud after orchestrating a sophisticated scheme that netted him over $8 million in fraudulent streaming music royalties 1

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. Operating between 2017 and 2024, Smith used AI-generated music and automated accounts to manipulate streaming platforms including Spotify, Apple Music, Amazon Music, and YouTube Music, creating billions of artificial streams that diverted royalty payments from legitimate artists and rights holders 3

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The case represents one of the first successful prosecutions of AI music fraud and highlights the growing threat that generative AI poses to the music industry. Smith faces a maximum sentence of five years in prison when he is sentenced on July 29, and has agreed to forfeit $8,091,843.64 2

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How the Streaming Royalty Fraud Operation Worked

Smith's operation relied on scale and sophistication to avoid detection by anti-fraud systems employed by streaming platforms. Instead of concentrating streams on a small number of tracks, he acquired hundreds of thousands of AI-generated songs from co-conspirators and spread the streams across them in smaller amounts 2

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. The tracks were uploaded under fake AI-generated artist names, including Calm Baseball, Calm Connected, Calm Knuckles, Calliope Bloom, and Callous Humane 2

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At the operation's peak, Smith was running 52 cloud service accounts, each hosting 20 bot accounts, for a total of over 1,000 automated accounts 1

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. These AI bots accessed streaming platforms using VPNs to mask their activity and mimic genuine streaming behavior 1

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. Smith calculated that each bot could stream approximately 636 songs per day, generating roughly 661,440 daily streams 1

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Based on an average royalty rate of half a cent per stream, Smith estimated his setup could generate $3,307 per day, $99,216 per month, and more than $1.2 million per year 2

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. In a February 2024 email, Smith boasted that his songs had generated over 4 billion streams and $12 million in royalties since 2019 1

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Defrauding Music Streaming Platforms and Artists

U.S. Attorney Jay Clayton emphasized the real-world impact of Smith's actions on legitimate musicians. "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" 1

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The scheme exploited the business model of music streaming platforms, which distribute royalty payments from a pool of funds proportionate to stream counts 3

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. By artificially inflating his stream counts, Smith siphoned money that should have gone to musicians and songwriters whose songs were legitimately streamed by real consumers 5

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. As one social media commentator noted, Smith had used "AI make the music AND the audience" and made $1.2 million a year "for music no human ever actually listened to" 3

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Court documents revealed Smith's awareness of the need to avoid detection. In an October 2018 email to co-conspirators, he wrote: "to not raise any issues with the powers that be we need a TON of content with small amounts of Streams" and added that "We need to get a TON of songs fast to make this work around the anti fraud policies these guys are all using now" 1

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The Growing Threat of Misuse of Generative AI in Music

Smith's case has placed a spotlight on the broader implications of AI-generated music for the industry. AI music-generating services like Suno, which has 2 million subscribers, now generate approximately 7 million songs daily—equivalent to a streaming platform's entire catalog every two weeks 2

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. The French streaming service Deezer suggests that 97% of people cannot differentiate between human-generated music and AI-generated tracks 3

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Platforms like Suno, Udio, and Google's Lyria have made it possible to create songs with vocals, lyrics, and instrumentation from simple prompts, accelerating production and raising questions about copyright, ownership, and artist compensation 5

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. Suno's CEO Paul Sinclair acknowledged the complexity, telling Billboard: "Truly, every single day I'm conflicted. This s-t is complicated ... I want to make sure there's whole future generations of the beauty of art and music and the ability to build careers around it" 3

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The issue extends beyond wire fraud schemes. High-profile artists like Drake have found their voices deepfaked for viral tracks they had nothing to do with . Spotify has since attempted to address the problem by establishing policies that forbid impersonation and require AI disclosures in music credits, while claiming to invest " heavily in detecting, preventing, and removing the royalty impact of artificial streams" 4

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Smith was arrested at his home outside Charlotte in September 2024 and initially denied any wrongdoing 4

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. His guilty plea marks a significant milestone in addressing AI-assisted fraud, but experts warn it remains a persistent game of cat and mouse that makes it increasingly difficult for small artists to stand out as their work continues to be drowned out by AI-generated content 4

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. The music industry, which had largely recovered from the Napster music piracy era of the early 2000s, now faces a new AI-based threat to revenue and artist compensation 3

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