Feds Indict Man in Landmark $10M AI Music Streaming Fraud Case

06 Sep Feds Indict Man in Landmark $10M AI Music Streaming Fraud Case

• Michael Smith has been indicted for using AI to fraudulently earn over $10 million in music streaming royalties, marking the first case of its kind in the U.S.
• Smith’s bots streamed an estimated 661,440 AI-generated songs per day at its peak, diverting funds from legitimate artists and songwriters.
• The landmark case highlights the need for increased vigilance in the music industry to prevent streaming fraud and protect artists’ rights.

In a groundbreaking case, federal authorities have charged Michael Smith, 52, of Cornelius, North Carolina, with using artificial intelligence to manipulate music streaming platforms, resulting in fraudulent earnings of over $10 million in royalties. This marks the first case of its kind in the country, highlighting the growing concern of streaming fraud in the music industry.

Smith’s complex scheme involved using automated programs, or “bots,” to stream AI-generated songs billions of times across multiple streaming platforms, including Amazon Music, Apple Music, Spotify, and YouTube Music. This fraudulent activity diverted funds from legitimate musicians and songwriters whose songs were streamed by real consumers, creating a false appearance of authentic streaming.

The scope of the fraud is staggering, with Smith’s bots streaming an estimated 661,440 songs per day at its peak, resulting in annual royalties exceeding $1.2 million as reported by Rolling Stone. To avoid detection, Smith spread the artificial streams across tens of thousands of songs; each streamed a smaller number of times to appear more credible.

U.S. Attorney Damian Williams stated, “This brazen fraud scheme stole millions in royalties that should have been paid to musicians, songwriters, and other rights holders whose songs were legitimately streamed.” The Charlotte Observer reports that the case is being prosecuted by the Southern District of New York Office’s Complex Frauds and Cybercrime Unit, with Smith facing charges of wire fraud conspiracy, wire fraud, and money laundering conspiracy, each carrying up to 20 years in prison if convicted.

This landmark case underscores the need for increased vigilance in the music industry to prevent similar fraudulent activities and protect the rights of legitimate artists and songwriters. As the legal proceedings unfold, the potential impact of AI-generated music and its use in streaming fraud remains to be seen.

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